Business Daily from THE HINDU group of publications
Saturday, Jul 01, 2006
Business Daily from THE HINDU group of publications Saturday, Jul 01, 2006 |
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Markets
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Stocks Logistics - Airlines
Deeptha Rajkumar
Mumbai , June 30 High fuel costs, falling yields, a depreciating rupee and higher interest burden continue to bog prospects of the aviation industry. Market sources talk of a shake out in Indian skies. And post fall-out of the Air-Sahara deal, Jet Airways, pegged as the largest private player in this industry, is likely to be the worst hit. The erosion in share price apart, there are also talks of the company's ADR being put on hold. The share price of Jet Airways ended at Rs 589.20, down 3.28 per cent on the BSE. The stock has lost ground by 15 per cent week on week.
Non-profitable
"Worldwide the airline business is a non-profitable one. Typically whatever profits they make, is ploughed back into the business to expand the fleet etc. Hence margins are not good," said investment analyst Mr Rajiv Sampath on the aviation industry. According to analysts, Jet Airways' bottomline for the next two quarters may deteriorate. An intensely competitive scenario appears to be keeping yields under pressure. "Given the negative operational environment on the domestic front, continued losses in international operations and uncertainty on the losses involved in the failed Air Sahara deal, the next two quarters will be bad," said an Edelweiss report. However, going forward it expects yields to stabilise. Mr Sampath said given the current environment and the increasing input costs, it would be difficult for the company to show profits. "There is also the fall out of the Air Sahara deal. To what extent of the loss can they absorb on the balance sheet," said Mr Sampath. On the Sahara deal, market sources maintain that the non-refundable advance of Rs 100 crore and the money pumped into Sahara's operations is likely to be booked as loss in the current fiscal. The loss is likely to be compensated by expected income of Rs 180 crore from sale and lease back of aircraft. The advance against shares of Rs 500 crore and the money in the escrow account of Rs 1,500 crore have been frozen as of now. With the entire matter being sub-judice, net interest cost is expected to go up with timeline for the recovery of around Rs 2,000 crore being uncertain, Edelweiss said.
More Stories on : Stocks | Airlines | Jet Airways (India) Ltd
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