Stronger rupee, Kingfisher woes to aid airlines in Q3, says report

Our Bureau Mumbai | Updated on October 12, 2012 Published on October 12, 2012

Airline companies will benefit in the near term from an appreciating rupee, temporary shutdown of Kingfisher, capacity discipline and improvement in utilisations and yields due to the onset of the busy season, according to a report by Bank of America Merrill Lynch.

“While we expect a weak second quarter of FY13 results on account of seasonality, we could see a sharper-than-expected recovery in the seasonally strong third quarter,” the report added.

The rupee has appreciated six per cent against the dollar over the past five weeks. The report said that a significant portion of domestic airlines’ costs are dollar-denominated and each percentage point appreciation in the rupee improves the FY13 EBITDA by 0.4 per cent and 1.8 per cent for Jet Airways and SpiceJet, respectively.


The temporary shutdown of Kingfisher Airlines (3 per cent market share) is another marginal positive for the other carriers as this further consolidates the industry and eases supply prior to the busy season, the report highlighted. Additionally, the show-cause notice by the aviation sector regulator puts a question mark on Kingfisher’s return.

“We do not expect Kingfisher to normalise its operations in the near term. Despite Kingfisher’s temporary shutdown, none of the carriers are rushing to add capacity,” the report added.

Indian carriers are not renewing expired leases. They are also sub-leasing aircraft in order to keep the capacity under check. “As per our channel checks, over the next 3 months, we expect addition of 5-6 aircraft, most of which will be utilised in the underserved international routes,” the report noted .


Published on October 12, 2012
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