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Domestic aviation sector may see recovery in Q3: Report

Last Updated: Friday, October 12, 2012 - 21:21

Mumbai: The struggling domestic aviation sector is likely to see a recovery in the third quarter on the back of a stronger domestic currency and temporary shutdown of Kingfisher Airlines, among others, according to a report.

"While we expect weak Q2 results on account of seasonality, we could see a sharper-than-expected recovery in the seasonally strong Q3.

"In the near-term domestic airline companies will benefit from an appreciating rupee, temporary shutdown of Kingfisher, capacity discipline and improvement in utilisations and yields due to onset of busy season," a Bank of America Merrill Lynch report said here on Friday.

Noting that the rupee has appreciated close to 6 percent to the dollar in the last five weeks, the report said the appreciating rupee will also have an indirect impact through the prices of domestic fuel.

On the temporary shutdown of Kingfisher, it said, "Kingfisher has temporarily shutdown its operation to negotiate with the workers. This is another marginal positive for the remaining carriers as this further consolidates the industry and eases supply prior to the busy season."

"Additionally, the show-cause notice by the regulator further puts a question mark on Kingfisher's return. We do not expect Kingfisher to normalise its operations in the near term," it added.

The report also said it does not expect any significant capacity addition in the near-term.

"Despite Kingfisher's temporary shutdown none of the carriers are rushing to add capacity. Domestic carriers are not renewing the expired leases and also sub-leasing aircrafts to keep the capacity under check.

"As per its channel checks, over the next three months, the agency expects an addition of five to six aircraft, most of which will be utilised in the underserved international routes," it said.

It further said it expects Jet Airways and SpiceJet to post substantially lower losses in FY13 and strong profits in FY14 due to strong yield recovery in the domestic segment and route rationalisation in the international segment.

"According to our interaction with the vendors/component manufacturers of MSIL, the company is currently working on a production schedule of 800 cars/day for the New 800cc to be launched on October 16, 2012," the firm said in a report.

Currently, the old Alto production is pegged at 500-600 cars per day. The incremental volumes from the new car could be 200 cars per day, it added.

MSI is looking to regain lost ground in the small car segment with the launch of the completely new version its erstwhile best selling model Alto. It is also offering CNG option in the new Alto 800.

Launched in 2001, the Alto sold a total of 20 lakh units in the domestic market and exported another 2.47 lakh units.

MSI and its vendors have spent Rs 470 crore in developing the new Alto 800, which is based on the platform of the previous model.


First Published: Friday, October 12, 2012 - 21:21
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