Overview on Aviation Industry ✈️

Airlines is one of the most affected industries during the time of the pandemic. In the past two years, Indian Airlines incurred a loss of 8 billion dollar's. On one hand, the number of travelers are still more than the pre-covid level, on the other side the debts of the airlines are piling up day by day. The airline's sector in total lost around 39000 jobs during the pandemic. Even though airline companies are struggling to survive, Rakesh Jhunjhunwala plans to invest in $35 million.

Since 2020

1. Indigo combined loss for six quarters is 10,000 Crore
2. GoAir Plans to revive its loss by going through IPO
3. SpiceJet posts a loss of 1000 Crore

Let us know the cost structure of the airlines business:-

Airlines have a very high fixed cost and variable cost.

1. Fixed cost around 40%-50%

   Aircraft leases expenses(10%-16%)

   Maintenance(8%-12%)

   Staff cost(12%-18%)

2. Variable cost around 30%-40%

   Aircraft fuel expenses around 36%. Air fuel costs nearly 1/3 of the total fee.

3. Operating expenses around 25%

Why airline industry is not lucrative?

1. Less Operational Margin: Profit margins are very low and can't even meet operational expenses.

2. Lack of Pricing  advantage:- As there are a lot of LCC, they cannot even increase the fare as this may lead to less occupancy . Many low-cost carriers (LCCs) have entered the Indian air travel market and stimulated traffic through their low-cost business models. By using price stimulation as a core business strategy, LCCs have been able to cater to the vast appetite for air travel by India’s middle-class segment.

3. High debts: First of all overall profit earned is less, airlines need to pay this profit as interest for the loan taken from banks. Moreover, Airlines take huge loans to expand.

Why RJ wants to enter Airlines Business?

RJ named Akasa Airline which  will be an ultra-low-cost carrier. The price of the airlines is cheaper than low-cost airlines like SpiceJet.

As Boeing is in Big trouble, RJ has ordered  25 planes from Boeing. As Boeing undergoing this crisis, the Buyer gets bargaining power which leads to getting aircraft at extremely low prices. Akasa Airlines bought planes at a 50% discount  from Boeing which  saved around 1 billion dollars as operating expenditure. RJ aims to expand to 70 planes within 4 years- Goair took 15 years to achieve this mark.

RJ planned to implement strategies deployed by Ryan Airlines and Southwest Airlines.

Aditya Ghosh, President of Indigo Airlines in 2018 joined Akasa Airlines and holds a 10% stake in Akasa.

How RJ able to buy at low cost 50 % discount from Boeing?

There are only two manufacturers: Boeing & Airbus

• In 2021, Boeing is in big trouble as the Boeing 737max  model has been banned for 2 years.  Two Boeing 737max  crashed within 5 months which lead to the death of 346 people.
•  After this news, many airlines canceled orders to Boeing. The orders of Boeing 737 max fell from 837 in 2018 to 69 in 2019 which lead to a profit of 10.4 billion dollars company to a loss of 636 million dollars. The company has a loss of $12 billion in 2020 alone.

Disclaimer:

We are not interested to invest in any Airline Stock.😂😂😂

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Tomato 🍅 kilo 40 in supermarket, but 140 per kilo in Stock market 😂

*NEW PARADIGM* -

Company X accumulated losses of over Rs 4,600 Crore

Incurred Loss of Rs. 106.9 Crore in 2018

Loss of Rs. 1000 Crore in 2019

Loss of Rs. 2400 Crore in 2020

Loss of Rs. 800 Crore in 2021

Loss of Rs. 350 Crore in 3 Months Apr to June 2021

Aggregating Total Loss of Rs. 4600 Crore from 2018 to 2021 June

With this Losses continue to mounting high, they managed to stand in their foot from 2018 till Today. Strange that it is not a Year old Business having Past years of Profit Accumulated which can set off their Present and Future Losses. Hence it is Quite evident that Net loss is funded by Capital and Debt. But Why the Investors keep pumping the fund in the Startup even when they see no Profit in 4 years.

If the Business was running on Loss 

*Q) Were the Employee Not Paid ??*

Answer is No, They were paid handsomely

*Q) Were the Customer forced to Pay the high amount ?*

Answer is No, they were instead given Meals at high discount

*Q) Might the Founders and Top Brass was taking less Perks ?*

Answer is No, 

Founder Basic Salary was Rs. 3.5 Crore

Co-Founder -Gross Remuneration was Rs. 3.7 Crore

CTO 1.5 Crore

CFO 3.26 Crore

*Q) Any Income Tax*

A) Since the Company was running at a loss, there is no Income Tax payable

So who was bearing the burnt of Heavy Loss ??

Answer is the Investor of X Company having stake in the company.

*It is Proved here the Loss of 4670 crore is funded by External Investor*

So Save this Word in your mind, It is the Existing Investor of X Company who are at Loss.

Now How this External Existing Investor would gain if the Company is running Loss ??

Now here the Trick, there is a Trading of Loss. What If I tell You that Loss can be sold at a Profit !!

Yes that is Possible

Investors (Top 5 Investors were holding around 50% Stake) who pumped fund into the startup has already eaten up their fund with the losses.Yet in the books they were holding Numbers of Share and % of Stake.

*VALUATION*- The Talking Point

Now, The Company gone for Independent Valuation by *a Valuer* 

*The Valuer* valued the Loss Making Company for Rs.60000 Crore !!! Strange But True

With this Valuation, Company went for IPO that means they are going to list their Shares in Stock Market making their Shares easily accessible for all Public to Purchase and further Sale.

Strong Advertisement, Endorsement by *Some Experts*, News Channels, Social Media, etc created such a Hype in the market of Forthcoming IPOs that it gave the feeling for any Stock Market Trader a Cake 🎂 which no one going to give a miss to bite.

With such a Marketing, Valuation and Expert Endorsement, IPO got over subscribed by whopping 38% with Listing priced at Rs 116 which was Valued at 72-76( which itself was questionable)

The interesting point was that Company X went for IPO for Rs. 9400 Crore, Out of Which only 400 Crore will only pumped into Company, Rest 9000 Crore was Part of *Offer for Sale* by Existing Investor. (Did anyone Noticed that Subscribing to IPO means Purchasing Shares from Existing Investor which generally People reluctant to do, as they are more interested in funding the company then buying such shares from Existing Investor.) That means out of 9400 Crore subscribe and funded by Public in the form of Rs. 116 share, the 9000 crore will go into the pocket of *Early Investors*

Now here we go !!!! 

*Who are these Early Investors ?*

*These are the same people who funded the loss making Company and now they sold their stake at higher profits.*

Now the Value of Share of Early Investor, is 1010 times higher than they Purchase the share at first. 

So, for 4700 Crore Loss Making Company, Everyone was Paid at value more than worth

- Employee

- Customers

- Founders

- Top Management

- And at Last and at Higher rate - The Investors

So who is now Handling the Loss ?

Yes, We Public holding Shares of X Company !!!

Right, The Loss has been Traded from the Top 10 Investors to Public at a Profit from 60 to 1010 times !!

This is Stock Market for You !!!!

Valuation, Media Marketing, Experts has made the Loss traded into pocket of Public at extremely High Value at the entrance

Now, What is the use of fundamental, Even Loss making Company is beating Profit yielded organization just on the basis of Future perception which is made to be created by Environmental element (sponsored or independent is questionable)

We see the way Stocks are traded in Stock Market are influenced by Promoted factors rather than Fundamentals and Scientific cause.

*Burden of Actual loss of 4600 Crore + Now Additional Loss due to Over Valuation are into pockets of Public*

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