Aviation flying high: What are the safe bets there?

20850 Investors following Jet Airways. Share this News with them.

0

Like this story, share it with millions of investors on M3

Aviation flying high: What are the safe bets there?

The industry is witnessing 75-80% load factor with high yield, explained Nikhil Vora, Managing Director, IDFC Securities. The stability in the sector he said was seen along with continued passenger growth in the coming months. "The space is also seeing business class travel picking up," he added.

Post your opinion here

 

0

Tweet

Share on Tumblr

Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news SpiceJet | Kingfisher Airlines |

Q: How much of a gap would you say still exist though between yields and traffic in the sense how much more can you expect by way of improvement in profitability?

A: I wouldn't bet on material increase in yields from the current levels. I think the fact is that you have seen yields stabilising at current levels with a load factor which is in the 75% to 80% zone. I think that is very heartening. So, I don't think any player in the market right now would be looking at material increase in yields give or take 3-4% points.

I think if most of the players start to make a fair bit of cash generation at the current yield levels, the reason and the rationale to increase yields significantly from here may not exist. So, I am very happy with the current state of affairs and just hoping that it continues for the next one year.

Q: Is the bump up still coming from the economy segment or is the cream starting to come from the premium because that will also change a decision between a Jet versus a Spicejet?

A: Right now, it is across the board, but clearly the fact is that passengers are moving in the front. So, the business class travel and the first class travel have picked up materially and that is where the money is for most of the aviation guys. You have seen a fair bit of structural change even in the low cost carriers. Some of them have moved more to premium class seats or luxury seats and so on so.

Clearly, people are moving ahead in the aircraft so to speak and that is where a lot of money is being made. The load factors in the luxury or the premium class have been significantly ahead to that of the economic class. So, I think the idea is that people are now starting to be willing to pay the fair capital for flying right now, which wasn't the case in the last four years.

Q: Since it is in FMCG, just want your thoughts on Bajaj Corp , the stock which listed, from where it is right now post listing, can you justify more valuation upside here or headroom here?

A: I cannot justify it either ways. We don't track it very closely as of now. We are in the process of looking at companies, so would like to reserve a comment on that.