AVIATION – GETTING READY FOR TAKE OFF!

Two days ago, it was a pleasant surprise for all of us, all of us who liked the travel experience of Jet Airways, to see that the new management has advertised for experienced pilots. The airline is hiring! And that, in these times, when the aviation sector is down and beaten down is very good news.

Last week, another news took us by surprise – the stock market investor known to all, Rakesh Jhunjhunwala is taking a dive into the airline sector – coming up with a unique idea, his airline venture, Akasa, will be an ultra-low-cost carrier (ULCC). He will have a 40% stake, bringing in some Rs.250 crore in Akasa, which will have 70 aircraft of up to 180 seats within four years and plans to launch it by April’22. Jhunjhunwala has always had a penchant for the sector as he had invested in Spicejet and then in Indigo, he was a participant right from the IPO.

There is also a murmur going around that Jet Airways founder, Naresh Goyal is also looking at a comeback with a new airline. In case of Air India, the divestment has not happened and again, there is unconfirmed grapevine that the Tata’s might be invited to take over.

That’s what it is – a lot of buzz around the aviation sector. From where we stand right now, it looks like the current downturn is being used to shore up the sector as all the suppressed demand might eventually overwhelm – demand far outstripping the supply.

The Govt also probably thinks so – it is planning to pump in Rs.25,000 crore over the next 4-5 years for expansion and modification of existing terminals, expansion or strengthening of existing runways, new terminals, aprons, ANS, technical blocks, control towers, etc.

The Govt has also given an ‘in-principle’ approval for establishing 21 Greenfield Airports across India. In recent times, six Greenfield airports have been operationalized across the country namely, Shirdi in Maharashtra, Pakyong in Sikkim, Durgapur in West Bengal, Kannur in Kerala, Kalaburagi in Karnataka and Orvakal in Andhra Pradesh. 

There is no doubt that if the pandemic does eventually subside, travel will take off like never before; it’s a gamble though as no one knows where the virus is headed.

But before you jump to take positions in the sector, if you are a Warren Buffett disciple, its best to know that he fell out-of-love for the sector and very famously said for the sector, ““It has eaten up capital over the past century like almost no other business because people seem to keep coming back to it and putting fresh money in. You've got huge fixed costs, you've got strong labour unions and you've got commodity pricing. That is not a great recipe for success.”

Maybe not as a stock market investor but we most certainly look forward to more airlines taking to the sky; the more the merrier and hopefully, cheaper!