What do you guys think about Indigo as a long term buy (~5-10 years)? Its trading at 10-20% from its all time lows

[resjudicata]

@muse86

Airline industry is quite difficult in general

This.

India is mainly a budget flyer market and I don't see that changing much even in 5-10 years. As a consumer, Indigo is a great company for their reach and punctuality. As an investor, I find it hard to make an investment case considering there are far better options with lower risk.

 

[muse86]

@resjudicata I understand that its a difficult industry with low returns vs risk but what I don't understand is that how are promoters making money? Surely they can wind up and move to a lower risk industry? What is their motivation? Why did Buffet after being so dead against airlines decide to deploy capital?

 

[lyndasoul]

@muse86 India is a low cost market unlike the US, so i don't this its an appropriate comparison

 

[heliumskylark]

@muse86 Nobody ever made money buying an airline stock. Why bother? Look elsewhere.

 

[muse86]

@heliumskylark Then why do people ever invest in this? Surely somebody sees something? Every airline millionaire is an ex-billionaire?

 

[resjudicata]

@heliumskylark Why did buffet invest in Delta Airlines then

 

[heliumskylark]

@resjudicata Buffet also exited his investment in Delta, regretting that he ever invested in an airline stock. Buffet is not god. He makes mistakes and he is honest enough to admit it as well.

 

[muse86]

@heliumskylark He didn't exit. He just brought it below 9.99% to avoid regulatory requirements. For all we know he may be wheeling and dealing to buyout an entire airline. I don't care either way. What I would like to know was what was his rationale behind picking up the Delta stake in the first place (after he advised never to invest in airlines)..

 

[elijahangel]

@muse86 Haha, reading your comments around the post, you are pretty determined about what you wanna do.
Go ahead and invest your money! It's yours to do as you will!

 

[muse86]

@elijahangel Actually, reading the responses, I probably won't. Even if I will, it'll be something that I can afford to lose. I might do some additional analysis of their financial statements for the sake of learning and then move on.

 

[resjudicata]

@heliumskylark He exited because of the virus. Pre virus he didn’t have a problem with the airline. Some airlines are run and managed better than most others. Whether you want to buy them or not is a different issue.

 

[bradk]

@muse86 Please dont invest in any airlines IMHO.
They are the worst kind of investments as most of them are debt Laden and have razor thin margins.
Avoid at all cost.

 

[lspiegel]

@muse86 “The fastest way to become a millionaire is to start with a billion dollars and open an airlines.” - Sir Richard Branson.

There are many other promising sectors which have compelling risk:reward from investment point of view. In my view airlines should be strictly avoided at this time.

In US, major airlines, hell even the largest aircraft manufacture is dependent on a government bailout. While their government could bail them out, what are the odds that our cash starved government will do the same for our airlines? Look at Jet Airways, Air India as living examples. You ‘may’ make a quick return but the future will always be dicey.

 

[muse86]

@lspiegel I am also looking at Jet, Air India, and soon to be Spicejet but for different reasons. As industry consolidates, who will end up on top? There will always need to be airlines, my thinking is that indigo might the best placed to take advantage of it.
On the other hand, you right, airlines has always been cut throat with poor returns.

 

[lspiegel]

@muse86 2 airlines are not listed (yet). GoaAir & Vistara. Personally I feel that Vistara will do a better job in being financially stable.
Indigo will also do well certainly as right now it’s the largest Indian airline. However please be careful of the corporate management issues the company is facing (the public spat between the 2 promoters).

 

[furiouscat4323]

@muse86 Another pro is that the risk of oil prices seems to be finally over. I am not talking of the recent blip, but with the imminent move to electric cars, oil shouldn't reach the very high level again. This used to be the biggest risk airlines had.

Air travel in India has just started. I doubt it would not come back to its previous level again. I would only worry about the two promoters fighting with each other. Such a rift at the top can break any company.

 

[montse811]

@furiouscat4323

I am not talking of the recent blip, but with the imminent move to electric cars, oil shouldn't reach the very high level again.

What imminent move to electric cars? Did I miss the memo?

 

[thei]

@furiouscat4323 Air travel in India is dominated by low-cost carriers. When oil prices are consistently low as you put it, these carriers adjust ticket prices lower accordingly to gain market share meaning margins are the same as earlier. Of course it takes time for markets to stabilize like this so in the very short run they will earn extra profits. In the long run (5-10 years as OP puts it) low input costs give way to low pricing and I don't see this being a driver of profits for airlines.

I would rephrase your claim - it isn't high oil prices that is a big risk to airlines. It's volatile oil prices that spike upwards. Airlines usually hedge against these anyway but hedging doesn't eliminate the risk, it just reduces it.

 

[johnlebaptiste]

@furiouscat4323 Electric cars are still realistically 20 years into the future. Just because Mr musk has broken barriers with tesla doesn’t mean it will be adopted world over, especially by poor countries because the infrastructure and energy requirement etc is massive. 80% of Indian citizens can’t even afford an i10, let alone adopting new tech

 

[valocz]

@muse86 If you are looking to park funds. I think there are many good companies which are trading well below there highs.firstly, i would not pick stocks in aviation till the covid picture gets over. Secondly, this continous fighting between promoters makes them less prepared to fight competitors and gain market share post covid.