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Indian Aviation Industry: Reeling Under Losses

Only five airline services companies are listed on the stock exchanges in India and hence only their quarterly financial information is available.

Top three of the five companies in the aviation sector reported a robust sales growth of over 20% each during the December 2010 quarter. Higher passenger volumes coupled with improved realisations enabled the industry post healthy sales growth.

Jet Airways, India’s largest airline by sales, was the only company to register higher net profit. Net profit margin (net profit to sales ratio) dipped marginally to 3.3% in December 2010 quarter due to a more than proportionate increase in net sales vis-à-vis profit. Profits were lower due to deferred tax adjustment made by the company.

Although sales of Kingfisher Airlines surged by 28.1%, it continued to record a loss at the net level during October-December 2010 compared to a year-ago. Appreciation of Indian Rupee vis-à-vis $ enabled Kingfisher register a decline in rent and lease rent.

Financial Performance of Listed Airline Companies in December 2010 Quarter (% y-o-y growth)
  Net sales Power & fuel Salaries  & wages Rent & lease rent Interest Depreciation Net profit Net Profit Margin      Dec 09 Net Profit Margin  Dec 10
Jet Airways 19.9 23.5 15.6 6.1 1.0 -5.4 11.7 3.6 3.3
Kingfisher Airlines 28.1 21.5 -1.2 -7.0 23.6 13.9 Lower Loss -31.7 -15.1
Spicejet 27.9 49.9 23.6 9.8 -33.1 18.0 -13.3 16.54 11.28
Global Vectra Helicorp 1.1 Na -2.3  Na -8.5 -16.3 Profit to Loss 8.37 -16.13
Jagson Airlines -70.9  Na Na  Na -16.2 7.7 Profit to Loss 2.22 -93.8
Average of the above 22.8 26.5 10.5 0.6 12.4 -2.2 -73.6 -4.1 -0.9

Oil marketing companies hiked aviation turbine fuel (ATF) prices for the eighth fortnight in a row on February 1, 2011. The ATF price ex-Mumbai to Rs 51,333 per kilolitre. This price was 29.4 per cent higher than the average ATF price in February 2010.

Sales growth in the March 2011 quarter is likely to be driven by both, higher volumes and better yields. Higher fuel consumption due to an increase in the scale of operations, and a rise in ATF prices are likely to result in a sharp growth in fuel expenses. Rent expenses may fall y-o-y, due to an appreciation in the rupee. However, the industry is expected to record net losses for the March quarter as well.

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