Investors are now starved of choice when it comes to investing in airline sector with only five airline companies listed on the Bombay Stock Exchange.
Further, most of these companies, barring Jet Airways, are small cap companies suffering from liquidity problems or lack of frequent trading, whereby meaning that money invested are locked up for a certain period of time.
Jet Airways which has a virtual monopoly in the aviation sector stocks, is all set to witness competition from state-owned Indian Airlines and Air India, with the civil aviation ministry giving the required touches to offload 20-25 percent each in these entities, now having monopoly over the Gulf routes.
Added to this, no-frills airliners like Air Deccan and Mallya-owned Kingfisher Airlines, which is set to take off by May, have also made intentions to tap the market in the next 12-18 months, after a series of 'Open Skies Agreements' in the offing with the US and UK, making the prospects brighter.
In view of domestic air travel growing at 25 per cent a year, the airlines industry is poised for rapid growth.
The increasing tendency by airlines to approach markets mainly for fleet expansion comes amidst an impressive 13 per cent appreciation in share prices of Jet Airways within one month of the listing, notwithstanding fears of rising world oil prices and ATF.
Jet Airways' high-profile IPO that hit the market in February 2005 was priced at Rs 1100, which many felt was overpriced at that time. But the stock nevertheless listed at Rs 1155, giving investors a premium of five percent.
After touching a high of Rs 1339, today it trades around Rs.1240 or nearly 13 percent higher than the offer price even in weak market conditions and despite hike in prices of aviation turbine fuel.
Though the valuation and the exact size of the shares to be offloaded by Air India and Indian Airlines are yet to be drawn up, markets expect that it could be "sizeable" and the immediate impact would be that it would add depth to the market for the airline scrips.
However, they are wary of the protection to state-carriers to the Gulf nations. The lesser known names include Jagson Airlines, Royal Airways, Skyline NEPC and VIF Airways.
All these airlines are small players in the industry and the entry of Air India and Indian Airlines on the bourses will give a fillip to investments in airline stocks.
The performance of small cap airline Royal Airways too has been impressive. The stock was languishing at around Rs 4 in August 2004 and it shot up to Rs 64 in February 2005. It currently trades around Rs 48 levels.