HSBC Bets On Spicejet Despite Losses

Spicejet might not have earned profits in the financial year 2012, but it is well poised to become a top player in the Indian aviation space. HSBC has recently upgraded the outlook on the stocks of this airline, making it a more attractive bet for the stock investors. The positive vibes being sent to the stock market are despite the losses incurred by the airline in the FY 2012. These losses are expected to continue in the next year also. So, what has made HSBC favour Spicejet more than its peers?

The positive points which have gone in its favour are:

1.    IndiGo Airlines is not listed on stock exchange: If IndiGo would have been listed, it would have been the preferred choice due to its history of successful and profitable operations of selling cheap flight tickets to the customers. But, since it is not listed, Spicejet is the next best bet in the Indian aviation market to put your money.

2.    Approval for more international destination: After the addition of 6 more overseas destinations, it will have more international coverage than any other Indian low-cost airline. More coverage would mean that the Spicejet flight booking would increase on newer international routes increasing its revenue base.

3.    Equity Infusion by owner: The infusion of the equity by the owners gives a positive signal of the intent of the owner to see the airline through the troubled times. While Kingfisher has failed on this score, Spicejet has won. The reflection of the seriousness of intent of owners to keep the airline going given more strength to the future plans of the airline. Kalanidhi Maran, the Spicejet owner has invested twice in 2012 to rid the airlines of its troubles.

4.    Permission to import fuel directly: Spicejet is one of the few airlines which have been allowed by the government to import the fuel directly which will mean savings of 20 percent on fuel costs. This can be passed on to the customers doing flight booking as the cheap flight tickets.

5.    Better FDI prospects: Since IndiGo Airlines is already having foreign investment, it is ruled out as a major beneficiary of the foreign aid. This makes Spicejet a hot favorite for the same.