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In Focus: Vanilla Sky

Airline stocks have rallied in the recent past, but their course remains uncertain

Indian airline companies seem to be in a perpetual air pocket. A projected growth of 30-35 per cent this year and falling aviation fuel prices fail to paint a bright horizon for the industry. A capacity glut and losses incurred by the players due to the increasing competition are likely to push industry losses to the vicinity of Rs 2,500 crore in the current fiscal year. In the recent past, airline stocks have rallied on falling fuel prices, increasing traffic in the third quarter and the overall rally on the bourses, still the future course remains clouded.

Jet Airways (Idirect Code: JETAIR), the country's largest airline is eyeing the international market in a big way. The company, with its plans to spread wings in the US, Canada and Asian nations, is aiming at 50 per cent revenues from international operations in next three years. The carrier, at present, operates over 330 daily flights to 49 destinations, including London, Singapore, Kuala Lumpur, Colombo and Kathmandu. The fleet size of the carrier will touch 59 by January end.

However, the Jet scrip has failed to stay on the right altitude. From its high of Rs 1,190 in early January 2006, there has been a tailspin with the scrip losing over 55 per cent by mid July. Ever since, the stock has failed to take off. The carrier incurred a loss of Rs 55.13 crore for the quarter ended September 30, 2006 as compared to net profit of Rs 68.59 crore. The figures may improve in the coming quarters with the start of operations on new route.

Deccan Aviation (Idirect Code: DECAVI), which owns Air Deccan, was also caught in the market turbulence that hit the bourses in June. After the initial free fall on the day of listing, the scrip has moved gradually since its listing on June 12. The bottom line as well as top line of the company were under huge pressure in the quarter ended June. However, things have improved a tad with net loss coming down. The company is expected to break even at a time when it starts operating 400 flights daily. It now operates a fleet of 34 aircraft, and is the country's second-largest carrier after Jet Airways. In its course to expand fleet size, the company is buying 60 Airbus A-320 aircraft from IAE engines. The company has also announced its foray into the air cargo business .

SpiceJet (Idirect Code: MODLUF), the smallest of the three listed aviation companies on the Indian bourses, has been hogging the limelight in December. Of the several investment proposals, which the carrier has received so far from the Tatas, Texas Pacific, Goldman Sachs and Isthtihimar, the company plans to retain around $80 million for expansion. Goldman Sachs and Isthtihimar had earlier invested around $92 million in the company. The low-cost carrier has undertaken a major expansion with an aim to boost its revenues to Rs 910 core by the end of fiscal year 2007 and to Rs 1,400 crore by fiscal year 2008. It has plans to add 23 new aircraft to operate more than 250 flights to over 24 destinations by 2009. The company expects a net profit by next fiscal through fleet expansion, increase in flight operations and reduction in operating costs.