With the the Covid-19 pandemic, the aviation stream took a hit in the year 2020 but latest information from January 2022 depicts potential scenarios for its recovery.
Here are the latest developments as of January 2022 from this article.
The Covid-19 Omicron variant’s surge continues to stall the travel recovery. We’re now projecting global airline revenue for 2022 to reach $432 billion in the baseline recovery scenario, representing 65% of 2019’s revenue. By the end of the year, global air travel demand could recover to 84% of 2019 levels in the baseline scenario.
We anticipate intra-regional travel to pick up in Europe and North America during the spring and summer, similar to the pattern in 2020 and 2022.
Given that January 27 the complete handover of Air India to the Tata Group will take place, what are your views on buying airlines equity, is it worth it?
MoCA says that the industry has shown the signs of pre-covid levels and is trying to reach the pre-pandemic traffic. Also, with the privatization of Air India infusing with the private sector management, I guess the industry may perform better and it’s okay to bet moderately given the industry is still a tough one for any company to be in.
I assume this question is with respect to Indian airlines.
As of now, there are just two listed airlines in India - Indigo and SpiceJet. Go Air is trying for an IPO but not successful yet.
While most optimistic scenario for airline still does not envisage revenue for this year surpassing 2019 revenues. And if you look at stock prices Indigo is right now already quoting more than 2019 price. SpiceJet has problem of its own and is dangerously close to bankruptcy. Besides with new airlines coming and increased competition from Vistara / Air India, making money is going to be difficult.
So I think all possible recovery in airline is already priced in and some more. Besides crude prices are rising again, so I am not very optimistic about sector as of now.
I am not too much optimistic about the Airlines sector in India. While it is yet to touch most of the population, I don’t like their wafer-thin margins. There are always better sectors to select stocks in.
I’m actually bullish about the airline industry. It is a proxy bet for economy’s growth. with affordable rates like 3-4k per flight for a 2-3 hr journey v/s 1000-1500 for Railwys for 24 hour journey, i guess many ppl will prefer the first option. These are still early days and we will never be a dominant country in the aspect but the trend seems to be changing in favour of airways considering how few travel frequently by airways currently.
There’s always something bad happening for the aviation sector when good news comes up. When the sector was looking forward to opening up of global economy after 2 long years, we have an issue of high crude prices which can crush the margins and demand for the sector.