InvestorQ : As the Tata group buys Air India, do you thing it is a good sector to be in?
Dawn Cherian made post

As the Tata group buys Air India, do you thing it is a good sector to be in?

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Mitali Bhutta answered.
2 months ago
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Let me put it this way, the sector is a tough one to be in and any airline company would tell you that. The trick is to keep airlines profitable in a sustained way, although the first challenges for Air India is to turn it around. The privatization should help, although it is not clear if the glory can be restored.

The Tatas bid Rs.18,000 crore and will also assume Rs.23,000 crore out of the Rs.64,000 crore debt. Rs.64,000 crore debt. But Tatas also get access to real estate properties of Air India, parking slots and landing rights. But challenges are that aviation is still an awfully tough sector to be in and Tatas are entering at one of the toughest times. Here is why.

The pandemic may be receding but the problems for airlines are likely to stay longer. The accumulated losses are huge and ATF prices are surging with crude prices. The profit spread between RASK and CASK has been in the negative for a long time, and unlikely to get any better in the foreseeable future. Recouping losses and reviving growth is going to be tough.

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