airlines are seen posting a sharp recovery in
the third quarter mainly on the back of a stronger rupeeand capacity
rationalisation due to the grounding of KingfisherBSE -0.44 % Airlines, according to a Bank of America
Merrill Lynch
report.
The report said the onset of the busy season will improve utilisation and yields while the grounding of debt-laden Kingfisher AirlinesBSE -0.44 % will lead to further consolidation in the industry.
"While we expect weak Q2 FY13 results on account of seasonality, we could see a sharper than expected recovery in the seasonally strong Q3," it said.
According to Merrill Lynch, concerns over the Indian currency have eased for now as the rupee has appreciated 6% versus the dollar over the past five weeks. "A significant portion of domestic airlines' costs are US$ denominated and each 1% appreciation in the rupee improves FY13 E EBITDAR by 0.4%, 1.8% for Jet AirwaysBSE 2.29 %and SpiceJet, respectively. Appreciating rupee will also have an indirect impact through the prices of domestic fuel."
The estimates for FY13 are based on an exchange rate of Rs 54/ dollar and $125/bbl for JetKero. The report also points to the temporary shutdown of Kingfisher as a positive.
"This is another marginal positive for the remaining carriers as this further consolidates the industry and eases supply prior to the busy season. We do not expect Kingfisher to normalise its operations in the near term," the report added.
The report, however, does not see significant capacity addition in the near term due to the grounding of Vijay Mallya-owned Kingfisher Airlines, as Indian carriers are not renewing the expired leases and are also sub-leasing aircraft to keep capacity under check.
"As per our channel checks, over the next three months, we expect an addition of 5-6 aircraft, most of which will be utilised in the underserved international routes," the report, drafted by DSP Merrill Lynch India's research analysts Anand Kumar and S Arun said.
Jet Airways and SpiceJet posted first quarter profits of Rs 25 crore and Rs 56 crore, respectively, after incurring successive quarterly losses.
The report said the onset of the busy season will improve utilisation and yields while the grounding of debt-laden Kingfisher AirlinesBSE -0.44 % will lead to further consolidation in the industry.
"While we expect weak Q2 FY13 results on account of seasonality, we could see a sharper than expected recovery in the seasonally strong Q3," it said.
According to Merrill Lynch, concerns over the Indian currency have eased for now as the rupee has appreciated 6% versus the dollar over the past five weeks. "A significant portion of domestic airlines' costs are US$ denominated and each 1% appreciation in the rupee improves FY13 E EBITDAR by 0.4%, 1.8% for Jet AirwaysBSE 2.29 %and SpiceJet, respectively. Appreciating rupee will also have an indirect impact through the prices of domestic fuel."
The estimates for FY13 are based on an exchange rate of Rs 54/ dollar and $125/bbl for JetKero. The report also points to the temporary shutdown of Kingfisher as a positive.
"This is another marginal positive for the remaining carriers as this further consolidates the industry and eases supply prior to the busy season. We do not expect Kingfisher to normalise its operations in the near term," the report added.
The report, however, does not see significant capacity addition in the near term due to the grounding of Vijay Mallya-owned Kingfisher Airlines, as Indian carriers are not renewing the expired leases and are also sub-leasing aircraft to keep capacity under check.
"As per our channel checks, over the next three months, we expect an addition of 5-6 aircraft, most of which will be utilised in the underserved international routes," the report, drafted by DSP Merrill Lynch India's research analysts Anand Kumar and S Arun said.
Jet Airways and SpiceJet posted first quarter profits of Rs 25 crore and Rs 56 crore, respectively, after incurring successive quarterly losses.
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