I wanted to know what are your views on the future of the Aviation Industry. The History has not be so great (in fact it has been horrible) for this sector with famous companies like Jet Airways (It is trying to revive) and Kingfisher going bankrupt.
My preliminary research pointed out few things which prove why this sector has performed poorly. Some of the reasons include 1. extremely low margins 2. heavy capex requirement 3. Volatility of Raw material prices and too many rules and regulations which makes it a perfect recipe of disaster.
But still, we see lot of investors showing interest in this sector ? like Rakesh JhunJhunwala is coming up with his own airline.
Is there something which is attractive in this sector that we are missing?
@Karthik@RahulKhanna and others who are into studying fundamentals pls share ur views on this
Never really understood this sector. Aviation stocks from whatever little I can tell haven’t really done much globally and in India as well. The only things that makes sense to me is to time these stocks, tactical trades if you will. Other than that, given how sensitive they are to input prices like crude, buying and holding doesn’t make sense to me.
We are seeing exponential growth in this space. I will not be surprised if this trend keeps on growing. 101 lakh → 10 crore approx.
This number, IMO can easily head to 20 crore per month easily in next 2 years if not bit early. Not sure if it translates to profits to aviation companies as there are lot of other factors involved (crude prices , competition(margin pressure) etc)
But, growth seems imminent considering the fact that lot of indians are now finding air transport affordable than earlier.
A AC 3 tier seat in Railways is still more comfortable and cheaper than an Economy class seat on a flight. Connectivity wise also Railway provides far better connectivity in Tier 2/3 cities than flights.
I feel majority of this growth in aviation is coming from Neo rich corporate employees who are working at 10/20/30 lpa packages in big cities like Delhi, Mumbai, Pune, Hyderabad, Bangalore etc
Pre Book 3 tier AC for 1200 bucks for overnight 10 hour journey
Prebook economy flight 1600 bucks for 2 hours journey (includes airport transfer + check-in+ 45mins flight).
Common sense would say choose option 2 because it’s just 400 extra and save 8 hours.
Jan Shatabdi, tatkal pricing sway people even more. No one would pay those cost for spending more time in train. That’s why aviation sector grows and people know that.
This doesn’t happened much any more. I think passengers are compensated if there is delay. So from what I know most of the time the trains are on time. Last 1 year or so.
Other than this whatever else is mentioned I too agree.
See screenshots below
Cheapest flight on Lucknow -Delhi route on November 1 is costing ₹ 3500 approx and the costiest train for same route is costing ₹ 1100 approx. It’s not a matter of few hundred rupees.
Yes, trains take more time but we have to choose cost plus comfort vs speed.
look at train timings. Its day train and graveyard time train. Nobody likes day train, your time & day is wasted. Day trains are no comfort, its boring as hell. Frequent travelers catch the evening or mostly night train even including travelers as nobody wants to lose a day.
Night trains are mostly full and railways get greedy and keep overcharging for tatkal.
As far as graveyard timing 12 to 3 am , not everyone prefers that. Firstly its night too dark and difficult to get to train station. Cabs and taxis charge lot, lack of public transportation and big security factor especially for girls. For a tourist its kinda tiresome, you don’t get proper sleep and probably tired the whole next day.
For flights its different, you get security and its not same travelling in train like for example If you travelled with laptop and want to go to restroom are you gonna trust some random stranger on train or wear it & go to rest room. Plus chances of getting shoved and getting laptop damage is there. All of that is not there in flight. Any pending work or meeting, you can arrive early at airport , you can open laptop and comfortably work.
Traveling wise airplanes are the fastest way of travel, depending upon the route. Investing wise they have their problems, although a lot of people invest, not stable or compounding business.
Unlike some businesses where maintenance is low or minimum, airlines have high opex, and fuel as we know is volatile. And there is no moat, no brand power, people choose whichever is less pricey or whichever is available at that point of time, so competition is intense.
So even if there is increase in air traffic, increased routes, increased connectivity, increased sales, if the bottom line is not increasing, no point in investing.
I had invested in Indigo and Spice Jet before, didn’t know about the moving parts then, so moved out
I’ve seen passengers around me working on laptops in trains. It’s not an issue, at least in AC coaches, no idea of Non AC as haven’t travelling in Non AC for more than two decades
Baggage limits are issue in flights. Sometimes extra baggage charge is more than the cost of extra luggage itself. No such restrictions in trains
Rare but I’ve heard stories of items in check in baggage getting damaged due to mishandling in my circle. And airlines refuse to accept their fault, forget compensation.
Security is definitely an issue in train and we’ve to constantly worry about our belongings if we’re travelling alone and need to go to washroom.
We all have different opinions and experiences, but they will not help us with investing, if they don’t reflect the consensus of the majority, the consensus of the end users. The same applies to the people we know as well, even if we say, all the people we know in our life never travel by air, and only use trains, the sample size is small compared to the sales.
But if we belong to the end user group, and we share the same consensus, if the feeling is unanimous, then it helps with investing.
This is why, many investors do scuttlebutt so as to see how the thing works on the ground, how the whole channel moves.
but it was funny to see that many of the indigo’s flights were delayed because of this reason
