Not Airlines, but a very different set of people are making the most of low fuel prices, surge in passenger traffic in the aviation sector

The ailing Indian aviation sector is finally getting its life back, thanks to reduced jet fuel prices and a surge in passenger traffic.

While the fuel prices have dropped by nearly 40% since 2014, as per estimated by the International Air Transport Association (IATA), the air traffic growth in India at more than 12% outstripped all countries in the first six months of the year.

Meanwhile, majority of the budget carriers like IndiGo, Jet Airways, SpiceJet and Go Air are expected to register profits after the government announced its draft civil aviation policy proposing a host of incentives for the aviation sector.

READ ALSO: The Govt just made flying way cheaper for the average Indian! The new aviation rules have more such great news for fliers


The above factors have led big investors to invest in the Indian aviation sector.

On Friday, billionaire Rakesh Jhunjhunwala, also known as India’s Warren Buffet, bought 1% of Jet Airways and also mopped up shares worth Rs 400 crore in IndiGo IPO.

He also invested money in SpiceJet. Not only him but many other investors have invested money in the aviation sector.

"Big investors who always look for midcap ideas may have realised that the aviation companies could do well in future given the improving macro factors like growth in passenger traffic, improving margins over falling ATF prices coupled with policy changes, which could be a game changer for the industry," Motilal Oswal, chairman and managing director, Motilal Oswal Financial Services told ET.

Industry experts point out that more investors are getting attracted to the sector due to fresh interest in the valuations of the airlines, particularly SpiceJet, IndiGo and Jet.

However, many investors are yet to take the plunge in the Indian aviation sector as Jet Airways is presently valued at Rs 4,961 crore and SpiceJet at Rs 2,802 crore due to sour past of Kingfisher.

"In order to attract investments, a company needs to be shareholder-friendly, in terms of a having a clear dividend policy and the presence of independent directors who would take care of the minority shareholder's interest. India's listed airlines have a long way to go as far as these aspects are concerned," Mahantesh Sabarad, deputy vice-president, research at SBICAP Securities, told ET.

(Image: Thinkstock)