Unlock move in India is good for the economy as a whole, but a curse to many sectors, including Aviation. Reason being, players in the sector earlier were allowed to operate at max 33% of Passenger Load Factor (PLF), while this was seen giving higher losses to aviation sector, due to its high fixed cost, thus having effect of negative Operating Leverage, coupled with no gains seen on Marginal Costing as well. Even now they have been restrained to 60% of PLF till end of Feb 2021.

Case in point is Q2 FY21 numbers of Indigo, wherein Net Loss was seen at Rs. 1,195 crore, which is at Rs. 4,040 crore for H1 FY21. We are unable to take a call on the timeline, till when Airline may be asked to operate at low PLF and how these companies will recover losses incurred, which may be of Rs. 6,000 crore in FY 21 for Indigo? Inspite of this, Indigo has a market cap of Rs. 50K crore, while Lease and Financial liabilities are at about Rs.35K crore as at 30-9-20.

Need to have extraordinary courage to invest in Aviation stocks now. Many institutional investors and MFs are stuck in the stock (Institutions holding 22.46% out of the 25.14% non promoter stake, translating into a 89.34% holding of available free float), and hence maybe are compelled not to give the true picture.