Maran buys more stake in Spicejet putting in 130 Cr and making his stake 43%. Does that mean it is profitable to buy Spicejet at this time?
I dont think so. I always am not a fan of airline companies. Or any companies which do not make profits.
the company just shows 85 Cr of debt and 90 Cr of negative reserves. For a 1000 Cr market cap and FY11 earnings of 100 Cr seems like around 10 times and hence attractive. Until 2 years back this company made heavy losses. these have still not been recovered.
But the negatives are that, this is a very competitive industry with Air India, Jet and Kingfisher taking most of the costly tickets. So called no-frills airlines are also very competitive with JetLite, KF(delta), Paramount, GoAir, etc.
With crude prices at more than $100, airlines cannot be profitable as they need to competitive, i.e. low revenue.
As it is seductive to own an airline, a lot of people try to own an airline. Richard Branson (Virgin) and VIjay Mallya are of that breed. They own an airline and that is a style statement.
Worldover, airline stocks have been the most speculative, they have never made continuous profits.
Some people say Maran has put in 2G money into Spicejet. To me, what matters is, can Spice pull off?
I appreciate Maran for the way he built Sun (though with political connections) - it was a well run company. But can he make this a sucess story? Can putting money into a loss making enterprise, buying more airplanes, improving customer service, introducing more routes really help a faltering company? I dont know.
let us watch and see. To me, I dont know, but I feel it is too difficult a task.
I dont think so. I always am not a fan of airline companies. Or any companies which do not make profits.
the company just shows 85 Cr of debt and 90 Cr of negative reserves. For a 1000 Cr market cap and FY11 earnings of 100 Cr seems like around 10 times and hence attractive. Until 2 years back this company made heavy losses. these have still not been recovered.
But the negatives are that, this is a very competitive industry with Air India, Jet and Kingfisher taking most of the costly tickets. So called no-frills airlines are also very competitive with JetLite, KF(delta), Paramount, GoAir, etc.
With crude prices at more than $100, airlines cannot be profitable as they need to competitive, i.e. low revenue.
As it is seductive to own an airline, a lot of people try to own an airline. Richard Branson (Virgin) and VIjay Mallya are of that breed. They own an airline and that is a style statement.
Worldover, airline stocks have been the most speculative, they have never made continuous profits.
Some people say Maran has put in 2G money into Spicejet. To me, what matters is, can Spice pull off?
I appreciate Maran for the way he built Sun (though with political connections) - it was a well run company. But can he make this a sucess story? Can putting money into a loss making enterprise, buying more airplanes, improving customer service, introducing more routes really help a faltering company? I dont know.
let us watch and see. To me, I dont know, but I feel it is too difficult a task.
http://profit.ndtv.com/news/show/vijay-mallya-grounds-low-cost-carrier-kingfisher-red-180433
ReplyDeleteIndian airline fights are getting harder. With KF red shut out, Deccan has come to an end in its life. But it is what brought 70% of the travellers to KF. will this come down?
with rupee rising as well, this can well be a bad time turned worse for the aviation industry in india