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A Good Year For Aviation Stocks
Jun 30, 2017

2017 started off on a brilliant note for aviation stocks. Crude prices had crashed. And lower cost of air turbine fuel suddenly changed the economics of the aviation business. In India, fuel costs account for a lion's share of operating expenses for companies like Spicejet and Jet Airways. Lower costs therefore meant the possibility of the companies reporting profits at least at the operating level. The stock of Spicejet, in particular, soared on the expectations of a turnaround in profitability.

To add to that, Buffett did something in the last quarter of 2016 that Buffett aficionados would consider unimaginable. He poured upwards of US$ 2 billion a piece into the four largest US airline stocks - American Airlines Group Inc, Delta Air Lines Inc, Southwest Airlines Co, and United Continental Holdings Inc. This took his total investments in these companies to a mammoth US$ 9.2 billion as of December 2016.

The interest in aviation stocks has dimmed since then. And with the only profitable airline in India, Interglobe Aviation (Indigo) showing the willingness to take humungous amount of debt on its books, we wonder if aviation stocks will continue to find takers.

Data Source: Equitymaster, Yahoo

This Chart Of The Day was published in The 5 Minute WrapUp - And the Company that Wants to Buy Air India Is...

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