|»5 Minute Wrap Up by Equitymaster|
On This Day - 10 JULY 2010
When will we stop swimming to airports?
In this issue:
---------------- Your views are invaluable. Make them count! ----------------
And that experience can be summed up in just two words. Chandigarh Airport.
The airport of this commercially significant city was nothing short of dismal. While its aesthetical appeal, or lack of it, could even be ignored for a moment, many other basic functional aspects of the airport were distressing to say the least. Water logging right at the airport's entrance made a pre-flight dip in the water mandatory. The top management of a leading PSU bank were also seen paddling through the water, suits in hand and pants rolled up. Distasteful food. A breakdown of the baggage scanner. The seemingly lax security. All cost us a lot in terms of loss of time and productivity.
The good news is that a new terminal is supposed to come up adjoining the old airport. This will presumably relive the plight of passengers at such a critically important piece of India's infrastructure machinery.
But in some ways, the transition from the old to the new at Chandigarh Airport is quite symbolic of the transition that the whole of India is currently in the midst of. This is the transition from a country which lacks many basic infrastructural requirements to a country that functions smoothly without any hiccups at such basic levels.
While the transition is sure to happen, it is the time it takes that will determine the real and opportunity costs that its citizens will have to pay along the way. The government sure needs to step up the gas!
This is judging from the way the sowing operations are taking place and reports of good monsoons from states. Sugar is a strong example. Last year, sugarcane planting in Uttar Pradesh fell by 17%. This then led to a 44% drop in sugar output as a result of which sugar prices shot up. Not just that, India was also forced to import large quantities of sugar. However, this year, the area under sugarcane in UP has risen by 15%. Not just sugar, but even rice and cotton planting are expected to pick up momentum. Indeed, good monsoons and fall in food prices will go a long way in dousing inflation in India.
Anyways, how this recovery is going to impact the stocks of airline companies is still not known. We know that despite being a great example of human innovation, the airline industry in general makes very little money on a sustainable basis. Sometimes, things get really bad. Like in the past few years when companies have to battle against high fuel prices and weak passenger traffic. Adding to that was intense competition that left most Indian carriers in deep turbulence.
Even as we see now, there is no respite against competition for all players. Travel anyways remains a commoditised service where customers are extremely price sensitive. Little wonder then, we remain cautious on the sector.
These firms are now planning to restart some of their outlets. This is following the deregulation of petrol prices. They are looking to expand in cities that proved to be unviable earlier, thanks to the government's regulated pricing mechanism. The important point to consider here is the level of decontrol the government would like to have for the industry. If it gets back to controlling prices in the future, it might again be bad for the private players.
The Indian markets ended on a positive note with an over 2% gain. It started off the week flat with the Bharat bandh being enacted and the RBI rate hike but closed positive towards the end of the week. The key reasons for the same were the IMF upping global GDP growth as well as raising its growth forecast for India.
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement
Disclosure & Disclaimer: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. The Author does not hold any shares in the company/ies discussed in this document. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services.
This document is confidential and is supplied to you for information purposes only. It should not (directly or indirectly) be reproduced, further distributed to any person or published, in whole or in part, for any purpose whatsoever, without the consent of Equitymaster.
This document is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity, who is a citizen or resident or located in any locality, state, country or other jurisdiction, where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject Equitymaster or its affiliates to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, Canada or the European Union countries, the same may be ignored.
This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Our research recommendations are general in nature and available electronically to all kind of subscribers irrespective of subscribers' investment objectives and financial situation/risk profile. Before acting on any recommendation in this document, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the securities referred to in this material and the income from them may go down as well as up, and subscribers may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Information herein is believed to be reliable but Equitymaster and its affiliates do not warrant its completeness or accuracy. The views/opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. This document should not be construed as an offer to sell or solicitation of an offer to buy any security or asset in any jurisdiction. Equitymaster and its affiliates, its directors, analyst and employees will not be responsible for any loss or liability incurred to any person as a consequence of his or any other person on his behalf taking any decisions based on this document.
As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407