IIPM PostGraduate (MBA) and UnderGraduate (BBA) Courses / Degree: What’s the magic word?

Wednesday, April 28, 2010

What’s the magic word?

IIPM: An intriguing story of growth and envy

“We can’t comment on the stock price as it largely depends on the volatility of the market,” says the Jet Airways’ spokesperson. Even Prakash Mirpuri, the spokesperson of Kingfisher Airlines refrains himself from commenting, quoting similar reasons. No doubt, after going through their worst financial phase, a sense of self doubt and susceptibility is ought to linger among these airlines.

But, with the economy finally showing some green shoots, it’s the increase in air traffic (which registered a 27% yoy growth in August 2009) over the last few months that perhaps seem responsible for the return of the investors’ confidence on these stocks. “The airline industry has been through the worst and the outlook is now more positive. Traffic is returning. And with the overall economic outlook strengthening we see an increase in the demand for air travel,” agrees Binit Somaia, Regional Director, Centre for Asia Pacific Aviation (CAPA). But the real question is – what are airlines doing to win back their investors’ faith and what is it that has really encouraged investors to invest in their stocks?

Certainly, after being battered and bruised for almost two years by one of the worst turmoils in the sector which almost grounded many of them, the players have learnt their lessons. In fact, they are now working on more

financially feasible and sustainable strategies, not only for themselves but for their stakeholders as well. “These revival strategies adopted by the airlines would definitely give a boost to the confidence of the investors,” avers Hatim Broachwala, Aviation analyst, Khandwala Securities.

Further, the big daddies of the sector – the full service carriers (FSCs) like Air India, Kingfisher Airlines and Jet Airways – rightly understanding the demand supply mismatch, have not only curved their invariable fleets and destination expansion spree, but have also implemented capacity cut and route rationalisation strategies. Keeping in mind the cost conscious Indian audience and the success of the low cost carriers, FSCs have also adopted the low-fare-no-frills model in a big way to boost, both their toplines and bottomlines. Moreover, they have even adopted various cost cutting measures – from reducing the free in-flight services, issuance of pink slips to forming cost sharing alliances – to make their business more financially viable.

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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