vishnuvega
11-12-2007, 07:10 AM
Turnaround on the cards
Deccan Aviation is set to make a comeback in terms of performance by addressing critical issues in this service industry. With an increase in number of airline passengers, the sector is set for fast growth and Deccan Aviation to even to outpace this growth.
The company is in a turnaround phase; various yield optimization and cost reduction measures implemented by it would be bringing in positive results in the form of increased revenues and cost savings over the next 2 years.
We believe that increase in revenues by about Rs2.8bn (on account of rise in yields) and synergy benefits with Kingfisher of Rs1.5bn would support the company in reducing its accumulated losses. To put things in perspective, the company reported losses of Rs4.2bn in FY07 (June ending) and Rs2.5bn in Q1FY08; this saving of Rs4.3bn is expected to effect a turnaround. In addition, the international route license would be available to the company w.e.f August 2008, which would open another avenue for the company.
With the economy growing at about 8%p.a, the aviation sector is set to grow at a faster pace. Deccan offers superior connectivity to 62 destinations, the best amongst the domestic airlines. With increased levels of disposable incomes in Tier-II and Tier-III cities, we expect the mode of transportation also to change, with the more affluent migrating to the mode of air transport, which would benefit Deccan substantially. We see Deccan as a good story for Capital appreciation over the next few years.
Deccan Aviation is set to make a comeback in terms of performance by addressing critical issues in this service industry. With an increase in number of airline passengers, the sector is set for fast growth and Deccan Aviation to even to outpace this growth.
The company is in a turnaround phase; various yield optimization and cost reduction measures implemented by it would be bringing in positive results in the form of increased revenues and cost savings over the next 2 years.
We believe that increase in revenues by about Rs2.8bn (on account of rise in yields) and synergy benefits with Kingfisher of Rs1.5bn would support the company in reducing its accumulated losses. To put things in perspective, the company reported losses of Rs4.2bn in FY07 (June ending) and Rs2.5bn in Q1FY08; this saving of Rs4.3bn is expected to effect a turnaround. In addition, the international route license would be available to the company w.e.f August 2008, which would open another avenue for the company.
With the economy growing at about 8%p.a, the aviation sector is set to grow at a faster pace. Deccan offers superior connectivity to 62 destinations, the best amongst the domestic airlines. With increased levels of disposable incomes in Tier-II and Tier-III cities, we expect the mode of transportation also to change, with the more affluent migrating to the mode of air transport, which would benefit Deccan substantially. We see Deccan as a good story for Capital appreciation over the next few years.