Airlines India, Indian Airlines

Deccan Aviation Ltd is the leaders in low cost flying in the Indian market. The company has now said that they would like to achieve profitability in the near future and for this, they are planning to stop flying some routes.

They are aiming to achieve profitability by 2008 and have announced their decision to rationalizing some routes.

The company is aiming to carry s many as 8 million passengers in 2007. The current year would see them carry around 4.5 million customers.

Many new players have entered into the Indian aviation market in the recent times and this has increased competition leading to less margins for existing companies.

They are already the India’s second-biggest airline by market share behind Jet Airways and are followed closely by government operated Indian.

During the day Deccan Aviation, which dropped nealy 6% recovered its loss in late trade and closed up nearly 5%. Deccan Aviation has given ace returns among aviation stocks from 23 Aug 06 to 22 Sept 06. It has given more returns than its peers and the BSE Sensex. The company has given 28% returns, while the BSE Sensex has given 7% return.

Most of the aviation stocks are nearly 100% away from its 52-week high. However, Deccan Aviation is 33% away from it 52-week high

Deccan aviation is also trading above its simple moving averages. Its 30 days moving average on BSE is Rs 90.42 and 50 days moving average is Rs 83.68.

Today it closed at Rs 110.90, up Rs 5.15, or 4.87% with volumes of 18,51,816 shares, compared to its five-day average of 5,65,141 shares, an increase of 227.67%. It has touched an intra day high of Rs 113.80 and an intra day low of Rs 96.65.

Company
% return from 23-08-06 to 22-09-06
52-wk high
% diff from 52-wk high to CMP

Deccan Aviation
27.97
148.05
33.50

Jagson Airlines
1.13
44.9
100.89

Jet Airways
16.41
1280
95.30

SpiceJet
22.54
89.9
95.43

Sensex
7.28
12671.11
4.08

Groups: Air Transport

Company
Last Price
Mkt Cap (Rs Cr.)

Jet Airways
655.40
5,658.07

Deccan Aviation
110.90
1,088.82

SpiceJet
46.00
847.96

Jagson Airlines
22.35
23.80

Deccan Aviation is India’s largest private sector charter aviation company with a network of bases spanning seven locations across the country. Promoted and operated by senior officers from the Indian Army Aviation, Deccan Aviation launched services from the corporate base at Bangalore in September 1997. The company boasts a fleet of 9 helicopters and 2 fixed-wing aircraft deployed across its bases at Bangalore, Mumbai, Delhi, Ranchi, Hyderabad, Surat, Katra (J&K), and Sri Lanka.

Today’s Declaration

Director of Finance of Deccan Aviation, MG Mohan Kumar says that the net loss of Rs 110 crore from April-June was due to the induction of five aircraft.

The company is targeting market share of 25-28% by FY08. The company need control the cash burn and likely breakeven by FY08. In the next 15 months, the company will take delivery of about 7 airbuses and about 8 ATRs.

The company is raising USD 100 million in this financial year, which will give a cash flow for about 15 months. They are building up a sizeable network for the country on a low cost basis so that the public can depend upon the large network as well as the low fares.

They also expect ATF price to decline by 7-8% at least from October.

Expert Views

Sharmila Joshi of Asit C Mehta, “The numbers of Deccan Aviation weren’t good and while people expect them to make a bit of a loss, this was a slightly larger loss than what market expected. But if the stock corrects a little more from here then it will look attractive again. Two things have to be kept in mind. One is the fact that if one looks at the kind of order, the kind of airlines that all these airline companies have ordered for, which are all likely to come in the next couple of months or in the next year or so. It is quite staggering-share numbers or airlines that have been ordered.”

She further added, “The industry seems to be poised where they are expecting better infrastructure and lots more air traffic to happen in the next couple of years. The industry says it could be the biggest boom that one has seen. So if one were to believe that then low cost airlines like Air Deccan would be able to take advantage of that. Because of this negative surprise that had come with these bad numbers, one has to look at a price maybe corretcing from here by another 10-15%.”

Technical Analyst, Rajat K Bose, “Deccan Aviation is on a corrective swing now. But the major support area is around Rs 91, the low today for it was Rs 90.35 at the NSE. This is the level unless it goes below this then the stock would not be all that bad it can once again bounce back. If it can manage to cross Rs 101 and trade above that then its corrective swing would be considered over since the low has already been posted at Rs 90.35.”

Gaurang Shah of Geojit Financial Services, “If one go to see not only domestically but the airline industry overall the world scenario has not being doing very well. We have been going quite comfortable as far as the crude oil prices because 38-42% of the ticket pricing goes into the aviation turbine fuel. But given the fact that this industry we are quite underweight on, there are better sectors to look at whether it is Deccan Aviation or Jet Airways or SpiceJet.”

He further added, “I don’t think the sector can perform going forward, given the fact that they have got huge plans also coming up. If they are going to sustain these kinds of losses year on year, I don’t know going forward what is going to be the outcome for the investors. So not very gung-ho about this particular sector.”

Deccan Aviation has posted a net loss of Rs 340 crore in the 15-month period to June, reports CNBC-TV18.

However Warwick Brady, the COO of the company said that the low cost carrier is positive about making up for losses through lower operating costs.

“I think one of the key advantages of being low cost is that our costs are almost 50% lower than the full service carrier, which gives one a strategic advantage that one can enjoy where you can simply charge lower fares and make money,” said Warwick Brady, COO, Air Deccan.

However, Air Deccan’s Managing Director GR Gopinath said that rising fuel costs have put Air Deccan through turbulent times.

“The aim was to deploy aircraft and gain market share so that when the turbulence is over, it will help us for future expansion and growth and profitability. We have deployed 20 aircrafts in the last 18 months,” said Gopinath.

Deccan Aviation Ltd. said on Monday it would raise fuel surcharge by Rs150 per ticket from Tuesday, while rival SpiceJet Ltd. said it would decide on the hike later in the day, reports Reuters.

Deccan Aviation, which runs the discount carrier Air Deccan, cited a rise in aviation turbine fuel prices for the increase. Earlier, India’s top domestic carrier Jet Airways Ltd. had increased the fuel surcharge to Rs 650 a ticket from Rs 500.

In early July, carriers raised fuel surcharge by Rs 200 a ticket, citing a 36% increase in fuel prices in the last year. Fuel charges make up almost 40% of an airline’s operating cost.

As many as 460 foreign nationals are working as commanders in flights by domestic carriers to meet the shortage of pilots, Minister of state for Civil Aviation Praful Patel informed the Rajya Sabha on Tuesday.
In a written reply, he said the government has decided to upgrade the capacity of Indira Gandhi Rashtriya Uran Akademy from 40 to 100 cadets a year and has set up a new flying Training Institute at Gondia in Maharashtra.

Besides, it has also conditionally increased the age limit for pilots to 65 years for exercising the privileges of their licences for commercial transport operations under prescribed conditions, he said.

Further, he said aircraft operators both scheduled and non-scheduled are permitted to employ foreign pilots as commanders to train Indian co-pilots so as to enable them being upgraded as Commanders.

However, Patel said whenever both the Commander and Co-pilot in a flight are of foreign origin, they are required to carry an Indian trainee pilot on board for exposing the latter to the line oriented flying training.

Replying to another question, Patel said the Aeronautical Society of India has recommended constitution of a National Aeronautic Commission though no decision has been taken by the government in this regard so far.

The Minister informed the Upper House that a total of 1,147 flights are being operated by Indian carriers on daily basis.

The 12 airlines are: Air India Limited (37), Air India Charters (07), Indian Air Lines (58), Alliance Air (15), Jet Airways (55), Sahara Airlines (29), Deccan Aviation Pvt Ltd (33), Kingfisher Airlines Ltd (15), Spicejet ltd (six), Paramount Airwaysd Pvt Ltd (2), Blue Dart Aviation Ltd Cargo (07), and Go Airlines (India) Pvt Ltd (3).

To a question on delay of flights, he said 58.55 per cent Indian Airlines flights were on time during the last three months (April-June).

Of the 41.45 per cent delays and cancellation, 2.86 per cent were due to commercial operations, engineering, ground support, surface transport, stores related reasons, 2.30 per cent due to inclement weather, airport facilities etc, and the remaining 36.29 per cent were due to consequential delays.

About complaints regarding functioning of private airlines, Patel said they were regarding missing/lost baggage, refund of tickets in case of delays/cancellations, denial of facilities like wheel chair, meals/snacks in case of delayed flights, etc.