tag:blogger.com,1999:blog-7004453.post2822404534443642393..comments2023-09-02T19:53:06.144+05:30Comments on Understanding and applying value investing principles: Why I will never buy an airline stock ?Rohit Chauhanhttp://www.blogger.com/profile/00356455735241398199noreply@blogger.comBlogger19125tag:blogger.com,1999:blog-7004453.post-58031294406145260552013-07-28T18:23:00.298+05:302013-07-28T18:23:00.298+05:30Rationally, one would short airlines & buy air...Rationally, one would short airlines & buy air india tickets.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7004453.post-29285611612909319282011-12-20T15:39:13.657+05:302011-12-20T15:39:13.657+05:30But Rohit tell me something, why would then an ent...But Rohit tell me something, why would then an entrepreneur invest in an airline business. I mean dont the Goyal's and the Branson's know their business better than us.<br /><br />My logic was that Indian's have really started to fly like anything and surely the way everyone is predicting doomsday for all Airlines (KF, Jet, Indian Airlines) is not justified. India cant have no airlines..<br /><br />Let me know if I am wrong<br /><br />Ashwini Damani<br />goldensilt.blogspot.comAshwini Damanihttps://www.blogger.com/profile/06779192196103485759noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-88065719431310367252011-12-18T13:23:24.388+05:302011-12-18T13:23:24.388+05:30Airlines have to be the amongst the single worst b...Airlines have to be the amongst the single worst businesses to ever be involved in. Speaking from an American perspective, all of the major airlines have been through bankruptcy at least one, and many multiple times. Labor and union costs are a killer, as is the fact that airlines are at the mercy of energy prices (although of the two, I think labor costs and union rules are the worst by far). Just on Friday as I was driving home there was a report on the business radio about American Airlines and bankruptcy. Actually, all of these value-killing airlines like United, American etc. make you appreciate how amazing a company like Southwest Airlines is!green investinghttp://www.greenworldbvi.com/why-alternate-green-investing/noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-24645612715541198802011-12-16T16:08:48.693+05:302011-12-16T16:08:48.693+05:30Hi Kunal here
Now what is the case with airlines ...Hi Kunal here<br /><br />Now what is the case with airlines in india and spicejet is that couple of large players KFA and AI were pricing tickets lower than cost . But now that has corrected otherwise spicejet was profitable (check out annual report of 2010 and 2011 ) <br /><br />But due to lessors and OMC putting them on cash and carry i do believe that irrational pricing is no more there.<br /><br />And in case of spicejet it has lowest cost per seat km and it is very efficient and it can make profit at 80% loads if pricing is right.<br /><br />And no business can survive if it does not make return so if AI and KFA fails and there is no one else daring to jump into airline business it will be good for incumbent like Spicejet, jet & indigo .<br />And one more thning earlier airline was capital intensive but no it is like service industries where they get planes on lease and operate so they don’t need too much capital to run airline and passengers do pay money and the cost are supposed to paid from passengers money . <br /><br />My exp. from spicejet is to have 6-8% margin that can be easily done.<br /><br />By Kunal ShahAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7004453.post-78930008383710313822011-12-15T13:41:53.983+05:302011-12-15T13:41:53.983+05:30i know this is kinda a mot point but occasionally ...i know this is kinda a mot point but occasionally if u can find a fearless genius this biz might make u cash at the right price....just chek out the ryan airlines ceo...a true cost cutters cost cutter....the dude has managed above average profitability (4 an airline)...for those of u interested chek out geoff gannon s twitter account..he posted a link to o'leary s profile....p.s nice to c dat u n barel karsan r on each others blog roll...maybe some day you ll do a post on unleveraged ,high promotr holding wala wi growth prospects financial stock<br />take carefat catnoreply@blogger.comtag:blogger.com,1999:blog-7004453.post-37042180853318038842011-12-12T22:42:08.845+05:302011-12-12T22:42:08.845+05:30Its a nice article...I agree with all the points m...Its a nice article...I agree with all the points mentioned above..but i also have one more point i.e in a country like india where infrastructure development takes a lot of time...no proper addition of trains as per capacity...huge migration to metros...the latest love volvo is inching closer towards airlines in terms of costs....airlines have an edge to improve margins might be in the next coming years since flights are easier to add and its private controlled...so i would like to see how spice jet performs....Venkathttps://www.blogger.com/profile/05618757823275293585noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-14297424050370924892011-12-12T13:40:47.048+05:302011-12-12T13:40:47.048+05:30Thanks Rohit for another timely article..:-)
I wa...Thanks Rohit for another timely article..:-)<br /><br />I was going to mention Virgin (different from other airlines) but you already answered it.<br /><br />What's easiest way to become a Millionaire? <br /><br />Become a Billionaire and then start an airline, you'll automatically become a millionaire..:-)<br /><br />VicVikas Ranahttps://www.blogger.com/profile/05508406035178681504noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-77064364185569490472011-12-12T13:05:48.601+05:302011-12-12T13:05:48.601+05:30Completely agree with you Rohit... about a year ba...Completely agree with you Rohit... about a year back I got tempted to buy SpiceJet (when it was around Rs 80+) but didn't because of my 'negative bias' towards airline industry. <br />I think airlines is an industry which is first to get affected by a slowdown and last to recover!Sarang Anajwalahttps://www.blogger.com/profile/15515098648899586934noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-60124987824162281752011-12-11T16:22:45.507+05:302011-12-11T16:22:45.507+05:30Hi Rohit.
Interesting points, agree with you.
Not...Hi Rohit.<br /><br />Interesting points, agree with you.<br />Not only Air India, Lot of State and Central PSUs are making very huge loss.<br /><br />regards<br />ManjunathManjunathahttps://www.blogger.com/profile/11419531854960429577noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-35617345075494095422011-12-11T09:13:49.235+05:302011-12-11T09:13:49.235+05:30Hi ansh
what valuation do you give a business whic...Hi ansh<br />what valuation do you give a business which is losing money overall or in 3 out of 5 years ?<br /><br />have a look at the sugar industry ..that industry has poor economics and has done badly too.<br /><br />In a short or medium term you can take a contrarian view and when the industry stops bleeding moeny, you could get a bounce in the stock price. you can exit at that time. however that is a speculative game.<br /><br />again if the industry has lost money in india and in general in other countries ..why should the future be so different in india now ? what has really changes in the airlines business ? planes are more expensive, fuel costlier and pricing power weaker due to the internet <br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-9251982139783349342011-12-11T09:09:58.878+05:302011-12-11T09:09:58.878+05:30Hi kunal
airlines and telecoms are not strictly co...Hi kunal<br />airlines and telecoms are not strictly comparable. telecoms have economies of scale and their marginal cost is close to zero. once you have invested in the infrastructure ..the cost of addition one more customer is not high and quite often close to 0.<br />as a result, upto a certain point bharti was able to drop price and still increase profits<br /><br />Inspite of this all telecom companies other than bharti have lost money and the sector as whole is not doing too well<br /><br />in comparison, the cost of running an airline is very high and costs fixed with severe price competition, so most airlines dont make money. also they cannot drop prices and still hope to make money<br /><br />on the second point of growth - yes growth will come, but then profitless growth is worse than no growth.<br /><br />In case of spice jet, i am not denying that the service is good ..even jet and kingfisher are good for customer. but the numbers for spicejet are not really inspiring. they have lost money in the last 5 years in aggregate, again in the current year and have negative networth. maybe you have an insight into the business and you are right. lets see how it plays outRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-28972515924555261362011-12-11T08:54:27.838+05:302011-12-11T08:54:27.838+05:30hi kiran
very interesting link. the best of manage...hi kiran<br />very interesting link. the best of managers cannot run an airline profitabily ..without our politicans running it ..less said the better<br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-57695873737422185732011-12-11T08:48:24.361+05:302011-12-11T08:48:24.361+05:30Hi rajshaker
thats true ..as i said in the post, a...Hi rajshaker<br />thats true ..as i said in the post, airindia is measured on utilization and not profits. you and me as tax payers fund this white elephant<br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-66814771372291169432011-12-11T08:47:33.436+05:302011-12-11T08:47:33.436+05:30hi dhwanil
you are right ..it is southwest and vir...hi dhwanil<br />you are right ..it is southwest and virigin airlines alone which have done well. In both cases, you have fantastic managers who have developed a one of a kind company and distinctive culture.<br />however the overall results have been very poor. If one has to bet money, the odds would be of losing money than making in case of airlines<br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-18796257426107124872011-12-11T01:22:00.205+05:302011-12-11T01:22:00.205+05:30Why do business groups or businessmen start an air...Why do business groups or businessmen start an airline at all? If the aviation industry makes losses worldwide, then why are new airline set up at all.<br /><br />Spicejet's current market cap is 902 crores, it has a 16% market share. That implies that the entire civil aviation sector is valued at 5640 crores, or 1.1 - 1.2 billion dollars.<br /><br />This seems to be out of whack and there seems to be some disconnect somewhere, Can investing in some airline stock be a contrarion investment at this point of time.Anshhttps://www.blogger.com/profile/12577979220646795251noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-90645947414114693042011-12-10T19:07:00.672+05:302011-12-10T19:07:00.672+05:30Investing is all about buying at a price significa...Investing is all about buying at a price significantly lower than its intrinsic value. <br /><br />any investment which has sufficient margin of safety will deliver returns .<br /><br />and about airline they have huge growth coming . i heard similar arguments about telecom in 2003-4 and heard they reduce the prices every monthly how they can make money see bharti airtel . people said it has 183 cr. shares and to have 1 rs eps is very tough. and now bharti is at 400 rs. <br /><br />so my logic says that at current prices spicejet looks to be great investment. it is no nonsense , no frills product which will have low cost structure compare to others <br /><br />and at cmp of 20 ur paying 900 crs for airline that will have @6000 cr of sales in fy14 <br /><br />so its a buy from my side , lets us see the time can only tell <br /><br />Happy Value Investing <br /><br />By Kunal ShahAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7004453.post-6574531576221438952011-12-10T16:49:50.259+05:302011-12-10T16:49:50.259+05:30Very good article!
It also helps to read this art...Very good article!<br /><br />It also helps to read this article by the brilliant Saj Karsan on Airline investments -<br />http://www.barelkarsan.com/2008/09/why-airlines-are-bad-investments.html<br /><br />Also, although I understand your anguish with Air India (and I am with you), here's an interesting profile of someone who drove the Airlines to bankruptcy (it seems they were making profits before he took over - can't confirm though; nevertheless, an interesting perspective on Air India and what ails it) -<br /><br />http://www.caravanmagazine.in/Story.aspx?Storyid=1186&StoryStyle=FullStoryKiranhttp://kiraninvestsandlearns.wordpress.comnoreply@blogger.comtag:blogger.com,1999:blog-7004453.post-67427885409560537152011-12-10T16:30:11.723+05:302011-12-10T16:30:11.723+05:30In addition to your comments, Air India also keeps...In addition to your comments, Air India also keeps the price of its tickets at artificially low levels (as you mentioned subsidizing the rich) which makes it even more difficult for other airlines to raise their prices and they are left with no other option but to incur operational losses.RAJSHEKHAR BASAKhttps://www.blogger.com/profile/11593311302618723285noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-23675884072153466432011-12-10T13:20:02.043+05:302011-12-10T13:20:02.043+05:30Hi Rohit,
Very true! I Agree with you completely...Hi Rohit, <br /><br />Very true! I Agree with you completely that it's a race to bottom indeed. What perplexes me is why in the world would any smart businessment want to own an airlines? I am still searching for an answer. <br /><br />Only company that I know of who has made tons of money for investors/shareholders is Southwest Airlines in US. IT has delivered postive cashflows/NP (and growing) for consecutive 32 years! A great achievement in an airlines industry! It has bucked the trend through diffentiated strategy/work culture/cost control.Dhwanilhttps://www.blogger.com/profile/02537043667425952923noreply@blogger.com