August 24, 2010 Sector View Indian Airlines Industry Stocks to
Offer Exceptional eturns !ue to "uge Entry #arriers Indian Airlines
Industry Sector View August 2010 1 Stocks to Offer Exceptional
eturns !ue to "uge Entry #arriers Airline is one of t$e few sectors
considered ta%ooed %y &any glo%ally' In addition, gi(en t$e
li&ited players in t$is seg&ent in India, it is one of t$e
least researc$ed sectors' )$at*s w$y we %elie(e t$at only a few
$a(e %een a%le to identify t$e potential t$at t$e sector offers'
After a period of successi(e losses faced %y t$e industry, t$ings
see& to $a(e turned around for good' +it$ de&and outpacing
supply, t$e pricing power is returning to t$e sector' ,i(en t$e
$ig$ operating le(erage, t$e pricing power along wit$ i&pro(ing
load factor would significantly %oost &argins for co&panies
in t$e sector' India*s $uge &arket si-e, its %oo&ing
econo&y, rising disposa%le inco&e, $uge . fast growing
&iddle class / al&ost t$e si-e of 0S and increasing
%usiness opportunities in s&all towns, all &ake us
confident a%out t$e de&and for air tra(el' "owe(er we %elie(e
t$e strong entry %arriers like lack of easy access to capital and
infrastructure %ottleneck would keep supply underc$eck' )$e
downturn in de&and seen during 1203 $as &ade t$e industry
wiser and now w$ile t$e de&and is growing o(er 245, cautious
outlook, %ot$ fro& t$e Industry . t$e lenders $as li&ited
capacity addition to &ere 45675, a trend expected to continue
for a few &ore years' )$e industry is also facing a se(ere
infrastructural %ottleneck, especially for a few critical airports,
a concern (oiced %y t$e 8i(il A(iation 9inister :raful:atel
$i&self clearly stating t$at we $a(e al&ost co&e to a
stage w$ere no &ore flig$ts in and out of 9u&%ai can %e
allowed' )$is would furt$er aggra(ate de&and supply growt$
&is&atc$ resulting in e(en $ig$er load factors and air
fares' #ecause of t$e aforesaid reasons, we %elie(e t$e Airline
Industry $as %ig surprises in store for t$e $oary industry sceptics
. would offer exceptional returns o(er &ediu& ter&'
Indian Airlines Sector Sector View August 24, 2010 Indian Airlines
Industry Sector View August2010 2 )a%le of 8ontents
O(er(iew;;;;;;;;;;;;;'';;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;< =ey
!e&and !ri(ers;''';;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;'4=ey
Supply #ottlenecks;;;;;;;;;;''';;;;;;;;;;;;;;;;;;;;;;;;;;;'12
8$allenges 1aced in India;';;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;14
Ot$er :ositi(es';;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;1>
Annexure;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;13 Indian
Airlines Industry Sector View August 2010 < O(er(iew )$e last
decade $as seen t$e Indian econo&y grow rapidly, wit$ its ,!:
expanding at a 8A, of ?'45 o(er 200
