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Whenever things got rough, I always remember what my father used to say. Running a business is tough, my son. There are ups and downs, glorious size, and sometimes you are low, that means you are feeling defeated The character for man and the character of business are not very different, are they? Yes, but when the chips are down, we must stand up. Trust ourselves off and what wrong. Volatility – It’s a funny thing. It makes you question yourself and wonder if you’ve made all the right decisions. Sure, you can question some of your decisions. But, stay steadfast on your course. Dad always said there are no shortcuts and no quick profits. There are no free lunches are they? Other is only one right way At PPFAS we think like Rahul and his father, that volatility is a fact of running a business. And buying equity shares is like owning a part of that business. We use value investing principles to manage your money This means we invest in the right businesses at reasonable prices and for a longer term PPFAS Mutual Fund There’s only one right way Mutual fund investments are subject to market risks Read all scheme related documents carefully We have a debut speaker today who’s Roel So, he’s part of our research team at PPFAS Thank you. And in our team we keep having these internal presentations where each person works on a sector or a set of companies, and they present internally. So this presentation was, we felt that it would be of interest to the FOF members as well So that’s how he’s here. Rohil, all yours . Good evening everyone. Thank you for taking your time and being here today. So just before we start, the dates for the next two FOFs are on the screen. 19th of November and 19th December So you’ll can just take that down So, can anyone tell me the significance of the two dates on the screen right now? October 29, 2018 and March 10 2019 I’ll just give you a hint. I’m not sure if that’s clear. But, anyone? Yeah, so, yes, that’s correct That’s correct. So it’s the crashing dates So Boeing 737 Max there were two crashes with the Lion Air and the Ethiopian Airlines. So we’re going to be talking about the aerospace industry in general today So this industry has been in focus because of the crashes, as well as some engine issues in the Airbus fleet with the Pratt and Whitney engines or in the Indian context, if you will, then the downfall of Jet Airways and the cash crunch at Air India. So we’re just going to have a brief look at how this industry works. So before I get to the presentation, just a little bit about the two crashes. So it claimed the lives of 346 people. And MCAS is the software that was responsible for causing these crashes. I’m not going to get Into details as to why this software failed But I can tell you what some statements were made after the two crashes. So firstly, three weeks after the second crash around March 29th of 2019, the then deputy administrator for the Federal Aviation Authority he said that this particular software, MCAS, it was being self regulated by Boeing at that time, rather than being certified by central authority for the airworthiness of the plane, this particular software was being regulated by Boeing themselves. There was no governmental agency that was looking into that. So to defend this policy, this person called Daniel Elwell, he said that there was a lack of funding with that particular agency of $1.8 billion and they would have required 10,000 people more. So now in hind sight, firstly,

it has claimed so many lives, and it has impacted so many more. And Boeing in the second quarter this year, financially speaking, has taken a hit of $5.6 billion with is three times the lack of funding so claimed by the deputy administrator at that time. Also, there are reports in the press that Boeing was continuously pressurizing the governmental agencies to give the 737 Max the approval to come into service because it’s competitor, Airbus had already launched the A320neo at that time, and it had been in service since nine months already. So they were losing out on a lot of market So the issue is not whether they should have a central agency looking into their planes and each and every software. But, more importantly, do Boeing and Airbus today have too much dominance and too much independence in the markets? So to understand this, we have to understand how the industry works, so I will be taking you through that. So I highly recommend this book, called Boeing versus Airbus. It’s written by John Newhouse So it was published in 2008 and this particular book will give you a good understanding as to the history of the aerospace industry from when Boeing started and how Airbus and Boeing have become such intense rivals over the last couple of decades. So just a little bit on the history for Boeing and Airbus. So Boeing was incorporated in 1916 and initially it started off as a a fighter jet manufacturer and defense goods for the US government during the World war So their main source of revenue was just the defense segments. But after that they started hauling mail for the U. S. Government and later they, once post the world wars, they tried to get into the commercial aircraft operations so as to better use their capacities. Also in 1970, looking at the potential that Boeing had in terms of earning foreign exchange revenue for the country, the European countries came together, and formed an agreement, to incorporate Airbus as the main competitor and have somebody come challenge Boeing So just to give you a context, today, the aerospace industry in general accounts for 9% of U.S. exports. So that is the level of importance that this segment has in U.S. itself So, 1978 again marked another important year for the aerospace industry So in this year, in the U.S. they deregulated, there was a deregulation act passed. So because of this act it allowed the airline operators to set their own fares rather than being dictated by the central government. Now, however, in hind sight, it has been claimed by a lot of people, and there were there were efforts made to re-regulate this particular sector because this lead to intensive price wars that we see today amongst all the airline operators, that are there in existence And that has led to the downfall of several of these operators as well. And 2003 was the first year when Airbus ever overtook Boeing in terms of the deliveries that they make and subsequently some complaints were filed with the World Trade Organisation due to the subsidies that were being provided to Airbus at that time so that it can help them compete with Boeing. So just the general business model, more like an understanding as to how the industry works, the aircraft manufacturers, that is, Boeing and Airbus, they manufactured the airplanes and assemble them, and they either sell it to the leasing companies or the airline operators directly. When they sell it to the leasing companies, they sell it in bulk, which is later on given to different airline operators for a lease rent on a per month basis. Also another bus So this is like a normal manufacturing operation till now However, we have something called maintenance operations of these aircrafts. So these aircrafts have to be maintained and serviced very frequently so as to maintain their air worthiness. So this is something that helps Boeing and Airbus generate some recurring revenue based on the number of aircrafts that they have already sold in the past. And MRO segment or maintenance and repairs operation, this is a highly

profitable higher margin business, so it helps them maintain a higher profitability level as well. So it is a critical component of their business model So what are the different components of an a airplane and how much do they cost coming up to, like when you assemble an entire airplane. So your assembly integration at the Boeing Airbus level accounts for only 28% of the total cost, whereas the engines on your airplanes account for another 20% The aircraft systems, interiors and avionics they account for another 19%. Aero structure is another component, critical component, which is comprised of fuselage, wings, nasal and controls. So fuselage and wings are considered to be more specialised areas wherein the company can gain some competitive advantage over the over the over Airbus or Boeing, whichever way So some of the key players in the market today. You have Boeing and Airbus. Generally, this industry is more or less dominated by these two up to at least 90% with Embraer, Bombardier, COMAC or the Commercial Aircraft Corporation of China, Mitsubishi Aircraft, so that is the Japanese manufacturer. ATR and United Aircraft Corporation, so that is the Russian manufacturer So there are fears that due to the recent trends of outsourcing the wings and the fuselage, there are fears that these new players can get the technology right and compete with Boeing and Airbus at a future date Some of the top Aero Engine companies are United Technologies, General Electric, Rolls Royce and Safran Group So something interesting about the engine space in the aerospace, in this particular industry is that I have seen a lot of internal JV s amongst themselves for certain niche segments like the Airbus 380 engine or so on. So that they can save a lot of R&D cost and so on So some of the key joint ventures have been International Aero Engines which is a joint venture between Pratt and Whitney, Japanese Aero Engine and MTU Aero Engine So earlier even Rolls Royce used to be part of this JV. CFM International is a 50:50 JV between General Electric and Safran Group And Engine Alliance is another JV between Pratt and Whitney and General Electric, so you can see how General Electric is also a part of two different JVs So they do have a lot of these JVs forming within this industry Just based on ranking the top aircraft leasing companies in the world today are General Electric, AerCap, Avalon, Fly Leasing and Nordic Aviation. AirLease Corp is ranked to 19 but it was found by Stephen Udvar-Hazy, who had earlier founded International Lease Finance Corp, which was earlier acquired by AerCap. So these are some of the top players who buy it in bulk, and in the Indian Context also, most of the airline operators, they tend to lease the aircrafts. So these guys are really important players in that sense to provide the financing arrangements for these airline operators So what the basic raw material for an aircraft till a certain time was, aluminium and steel, which used to account for 75% of the commercial aircraft’s weight. However, the 787 Dreamliner and the A350 were game changers because more than 50% of that aircraft was built by composites and other materials like titanium. So what this actually helped, like what we see in the auto industry today, especially in Europe, that they’re trying to light weight, light weight may the cars so as to improve fuel efficiency. So the logic remains the same here that with the compose composites, they try to lightweight the aircrafts so that so that they could improve the fuel efficiency for those aircrafts. So how can you differentiate aircrafts? So there are different kinds of aircrafts, so they’re generally, differentiated, based on various parameters. One is range, which is generally calculated in nautical miles. So one nautical mile is roughly 1.8 kilometres; The number of seats or the passenger seating capacity or the cargo capacity, If it’s a freight air plane; the number of engines and the seating configurations. So seating configuration can be either single, dual or triple. So it depends on the airline operator’s choice. So what this means is they can have either only economy, economy and premier economy or economy, first class and business class

These are called seating configurations, so that’s how they can differentiate. But this is more on a airline operator level. But generally the parameter used is the range and the passenger seating capacity. So I’m not sure of this slide is visible, so let me just try and sum it up. So the Single Aisle Aircraft so this is generally your aircrafts where you have a configuration of three and three on each side, and this in today’s in-service fleet, this accounts for 77% of the entire fleet. However, within this also, there are two broad segments. One, where Airbus and Boeing dominate, which is a slightly higher passenger seating capacity and one is smaller, regional aircrafts, which is Embraer and Bombardier dominated So Airbus and Boeing account for 65% and they their aircrafts generally seat anywhere from 120 to 200 passengers and can travel roughly 3 to 4000 nautical miles, whereas Embraer and Bombardier, they can seat maximum from 60 to 120 passengers, so that is the difference mainly. The range is somewhat similar from 2000 to 3000 nautical miles. Another key takeaway is that if you see the engines, so CFM and Pratt Whitney are present across all these aircraft manufacturers and they are the two main players within this particular single aisle aircraft segments CFM again is the JV between General Electric and Safran So why are single aisle airplanes important and why will this mix not necessarily shift like reduce from 77% going forward So some of the reasons are, firstly it leads to higher service revenue. So generally when you drive a car, the longer you drive it or the more you drive it, there is more wear and tear for the car, correct? But in an aircraft scenario that is not the only deciding factor. It also depends upon the number of landings and takeoffs that the aeroplane goes through And since these smaller aircrafts, they’re prone to smaller journeys like smaller distances, they generally land up more, they have more takeoffs and landings leading to much more wear and tear. And this leads to much more recurring revenue for Boeing and Airbus as well Secondly, this allows for spoke to spoke flights for the consumers. So rather than having people from various destinations come to Mumbai as a hub and then collectively taking them to one particular final destination, a smaller aircraft allows for lower number of passengers at each airport and therefore take them directly to their final destination rather than having them pool up at one central hub. So this has led to a increase in demand for the consumers from the consumers side as well, and lower fares as well Faster turn-around times. So generally, these smaller aircrafts, it is easier to so, when they are parked at the airport, there are some airport charges that they have to incur and pay the airport. The faster, they can turn it around and take and fly out of the airport, the better it is because it’s lower cost and they can make more trips so that they can earn more revenue and demand for lower fares. So in emerging market economies, the majority of these countries are a lot of a lot price sensitive. So in that case to have a smaller aircraft wherein, you can save on certain costs and have the fares as low as let’s say, in the Indian scenario as low as ₹4000 It is easier to generate demand and therefore the demand for such airplanes is much higher compared to the larger aircrafts. Vinyl aircrafts, which are generally your three for three seating arrangements, they account for 23% of the in-service fleet today, and in this particular segment you will only find Boeing and Airbus who operate. So in this segment they generally carry those long distances, and they can accommodate from 240 to 400 odd passengers, and the main two engine makers in this particular industry, in this particular segment are Rolls Royce and General Electric. So going back based on to see the market share and how it’s moved across the engine makers, the CFM International is the most dominant player with roughly 45 to 50% market share, with General Electric standalone also having roughly 20% market share. So General Electric is clearly a very important player in this particular industry

Engine Alliance, Pratt and Whitney and Rolls Royce also have sizable market shares in this segment. So across Boeing, Embraer, Bombardier and Airbus, the market share has roughly remained constant over the past few, within this decade itself, so the market share has been more or less 90% with Boeing and Airbus But again, recent trends have allowed for Boeing and Airbus to capture more market share And i’ll tell you why. So Bombardier had this aircraft series called the C series, and that had a lot of delays, leading to a cash crunch. They had to eventually sell it to Airbus, so Airbus now has a partial stake in Bombardier’s ‘C series’, which they’ve renamed to the Airbus 220 And they have further options to buy out Bombardier stake. So in response to this, Boeing had to also do something, and they proposed to buy Embraer’s commercial aviation unit. So that is the entire 6% market share that you see on the slide The entire commercial aviation unit is being proposed to by being bought by blowing themselves. So now this is only start because of the competition commission rate Now, because of the tariff was that are happening between us and Europe. But ideally, they are expected to go through. So if that happens, then you will actually seared war plea in this market rather than seeing somebody else with more than 23% market share. So justice of forecast. What is the size of the market going forward from so Airbus and Boeing? These players in this industry generally maker 20 her forecast of raisins. Now we think that 20 years is too long. We don’t know what’s gonna happen tomorrow. But in this case, because the replacement cycles are generally known as well as the order books being 7 to 8 years long, they do have a fair idea as to what the demand would be going forward. The current total in serviced lead today is 21,450 aircrafts, from which they expect only 10,600 to remain at the end of 22,037 hour remaining 37,400 a cross is worth. They’re expecting the new new production to be, and that amounts of total value of$5.8 trillion over the next 20 years to be shared mainly between Boeing and Airbus. So what region specific what the forecast is. You see the mixed today Asia Pacific accounts for 33% of the total in service fleet. Within Asia Pacific, you have India, China and Japan, which other three main countries with a sizable fleets, North America and Europe accounting for another 23% each. So going forward, however, they expect 43% of the new demand to come mainly from Asia Pacific’s. Clearly, Asia Pacific is going to be a key driver for their revenues going forward and based on the value of the employed KGaA growth for these regions have been calculated so of Asia Pacific, they’re estimating roughly five and 1/2 percent growth over the next 20 use. So of I happen to visit the side call, eh? Finance Journal. So they give you poor airline. What is the fleet makes in terms of Boeing, Airbus and any other manufacturer? So based on their region specific, I took out the top of operators in that region. So, for example, North America had American Airlines, Delta, Southwest, United and so on. So based on that, I tried to understand what is the region specific market share of these two companies? So North America roughly 55% is with Boeing, another 20% with a bus in Asia Pacific, it’s more or less balance. But however , in this also, it’s important to note that Japan, most of the Japanese operators they have all a bus fleets, also all Boeing fleets. And in India you will see majority of the operators having all Airbus please so waged on which country actually goes ahead tomorrow and has a faster growth. You will see the demand also skewed in that way, and the market share car also shift in that specific region So how long does it take for a craft manufacturer to from conceptualisation to actual delivery and flight? So it’s roughly 7 to 10 years that they take

and if you take the example of going Triple seven x so the programme was north and 2013. And as for this light, it shows that it was estimated that the first delivery would be in 2019 However, this has been delayed because of certain supply chain issues. So the movement, any political component supplier like the engines, engine manufacturers if did if there is any issue at their and also this leads to a delay in launching that particular product. And this leads to a Lord of deferred production costs for these companies. So some of the ways that they try and save on costs. They tried to have the same future large across various model, so that they can have economies of scale. The so Airbus has started something all new engine options. So if you are travelling by any aircraft and you see that you’re travelling by a 3 20 new, it means that the operator had an option to choose between two different of engine manufacturers and last the commercial aircrafts that you fly on so they generally can be used for a period of 7 to 10 years before they can be repo patient, a freighter aircraft. So this has to save the cost on manufacturing or completely new freighter aircraft, as well as for somebody like a FedEx who is buying these aircraft. They can have a mix of completely fresh across and flights across that have been repurposed. So this has done, say , one costs as well. So if you’re ever analysing and aircraft or airline operator, there is important to know what the cancel oh shit, you a lesson don’s of payments that they have to make So this is mainly when you have a direct sale from the engine from the aircraft manufacturer to their line operator. So roughly 2 to 5% is paid or when the form order is contracted when they placed the final order and 30% is paid in advance and equal instalments of 10% all six months apart. And the balance 65 to 68% is paid around the time of the delivery. So, as a said, the maintenance and repair of operations, this accounts for a critical portion of their profitability. Margins of aid accounts for it’s a critical component of their business model So how frequently are these maintenance cheques undertaken? So if you see that at different levels of cheques that happened some which happened on a daily basis, some on a weekly basis or some even 6 to 7 years apart. So the day of the heavy cheque is the most. They completely tear apart the A plane from the inside, the cheque it for a structural integrity again, and then they reassembled the aircraft So if anybody is interested, please have a look at this video. It’s only one hour long , and it’s on prime video. Amazon Prime It’s going Triple seven, the heavy cheque so you can have a look at this particular video. So what are some of the factors that lead to the success of these aircraft manufacturers? So they really need to have the mind said that every new model that they launch has to save on cost and downs of fuel efficiency for the airline operators, the airline operators only care about how fuel efficient aircraft is going to be, because the engine fuel is a very major significant portion of the profit and loss statement. After sales service and spare part availability again to avoid the aircraft going to maintenance and out of service, so they need to give a good a elementary level of the of the spare parts as well. So something very important and interesting in this sector is generally in the manufacturing industry. It’s just a party thing between the manufacturer and the final consumer. But our government plays a very important role in this industry as well , not just in terms of policy making, which is very normal across all the industries. Burden terms of government influences Well. So if today U S China relations were to break down, you will see the in one way or another the Chinese a cross A line operators. They will refrain from buying any of Boeing’s planes because it causes a lot of foreign exchange earning for us as well. So in retaliation they will try and go for a bus fleets

So how the political relations are between countries also play a major role in deciding where the demand is going to come from ed ability of the aircraft with the airport. So another interesting study in this on this is the Airbus 3 80 So the the world echo aircraft that we had so that across for so big that the airport had to had to actually make certain changes so that they can accommodate the aircraft and unload and lower passengers quickly and more effectively. So if these manufacturers don’t keep in mind as to work , the dimensions of the aircraft is what happens is the aircraft would have to make a lot of K pax and just to accommodate this particular aircraft, which may not even have so many volumes are not fly out of their political airport that frequently. So they were trying to frame from doing that. Which word again lead to the eventual downfall of the aircraft? This case, the Bus 3 80 has not been so successful and therefore they’re going to stop production of that particular model in 2020 21. So some of the risks as we spoke about the level of government interference and rounds of political relations or the policies these a common across majority of the industry’s supply chain constraints As we said, a General Electric were to have a supply chain inefficiency and they were not supplying their engines to the manufactures with the correct scheduled that will lead to a lot of delays and the first effort production costs, legal issues and inventory planning So in 20 planning again is important. So today , or post the crashes of the 737 max going continues to manufacture these aircrafts. They have been manufacturing at the rate of 40 per month, and the planes were grounded back in March. So today they have roughly 240 aircrafts already sitting in their passing lords , and they’re not able to sell it to the final alignment. Align operator. So this invented size itself comes upto total cost of roughly 7 to$10 billion. So managing your inventory levels also becomes a key component of the business model. Some of the common characteristics in this industry are mainly the Jake of So Initially, when a new aircraft or a new engine is being launched, the tender, a lot of production inefficiencies and one so because of that, you will see the at the initial phases. You will see a lot of discounting happening across these new models because of which the profitability of those new engines or the new aircrafts is much lower. But as the volume picks up for these models, they try and recover from the maintenance operations as well as through a better efficiencies in their production system. So there is a high discounting whenever new model is introduced, which leads a lot of margin volatility in those few years as well. So this ceremony was again important to improve profitability and have a recurring source of revenue because new aircraft will be discovered. Levels on those new across is really, really high. It’s as high as 40 to 50% of the original price and retirement stand doing grease on fuel. Prices are high because, of course, you want more fuel efficient aircraft, so you will tend to retire across at the airline operator level and place orders for new ones and interesting. So these are different models in once portfolio. On the left hand side, you will see mainly those 737 and the 737 max. So this is the single aisle aircraft of which are roughly priced around 100 to 1$20 million and the next night you have a bus, mainly a 3 18 the A 3 20 family, which is a 3 18 83 19 3 23 and 3 21 as well as the news. So the pricing is somewhat symbol of. But if you notice this is just the list price, what they actually sell, even as on days, the price of these across what they actually realised is 40 to 50% lower than what they could to Sometimes. What happens is the backlog they used to earlier stayed, at least at a bus Until last year. They used to stay the back Logan or in dorms of list prices. So the investors will never know exactly whether the list price

is being used. Of the actual price is that they’re gonna realise from the operator, then it depends on custody customer to customer worth. The level of discounting is so before I end on the boy, and Abbas said, it is important to understand this industry even from an accounting perspective. So it would be because these companies have different accounting standards, which really we have to be understood and the risks that are associated with them. So just some of them other revenue and cost recognition methods, especially because Boeing and Airbus incorporated in different countries regulations and the accounting practises that they have to follow a completely different the first production costs at going. So this is something that is very unique because of the Jake of what they do. Is the state that some of these calls that they’re incurring as one day they will be able to recover this or due to the efficiencies that they will have, let’s say, five years down the line or when the voiding so their other capitalist These costs rather is expensing them from the P N L statement. So some of these accounting practises really have to be understood, and the risks associated with them also really me to be need to be informed about before. So just to understand what the current Indian markets scenario is as well, just put in a few slides. However, if you want to understand this particular sector a little more and leaders , especially the aviation segment aviation industry. So Rajiv’s or has done a talk on this in December 2015 when Indigo came out with its IPO. What I will be covering today and downs of the Indian Airlines is just a brief highlight, But he has spoken a lot more and details. You can visit this video at any time. So what has been the market share across Indian Airlines? So the in the photograph you will see the market share that is pre jet a waste fall and on the right hand side , post the downfall of Jake Davis. So Indigo has improved its punk culture from 43 2 more than 50% as on so and Spicer. It holds around 15% market share with a render 13 and 1/2 again and interesting scenario because Air India is going through the cash crunch today. So how that markets are tends to move later on will be interesting to see So just some of the performance metrics of these Indian airlines, how on trial were they in terms of landings and takeoffs or the Lord? Fact a load factors nothing but the capacity utilisation of these airlines You will see that the Lord factors are pretty high , mainly 85 up. So while these capacity organisations are really good, but it’s not the same as you say, other manufacturing company. So to understand why it is important to understand water different cost line items for these airline operators. So what are the major cost for these operators? 36%. The biggest cost is the fuel. 36% of their operating revenues , roughly is just towards the fuels that the fuel that they have to buy the employee or the flight crew post comes after another 26% maintenance. As we said earlier, it’s a recurring revenue every year, or they’re going to have to maintain the aircraft is in service or not. It comes up to 10 plus six so that a 16% of their operating revenue So if you just combined the flight crew cost and the maintenance revenue that itself is 40% plus import charges, so that comes to another 10%. Roughly so, 50% of their operating revenue is fixed cost on these all cash basis. So in terms of operating leverage, there is a really high operating levels , and this does not take into account the interest that they have to pay on the death that they and how levelled their balances actually are. But on the flipside is their scope. For these operators, yesterday definitely is Sophy. See the last line under table domestic passengers. So as on Dade in India , there are 139 million passengers who have travel domestically as compared to US, which is roughly seven times higher, and China another four five times higher So there is definitely score. Also, the 139 million passengers is not unique passengers. It is people

who have taken the town trips or have taken multiple trips as well. So if you compare it to what the size of Indian population is at 1300 million and from the review if you say that they’re addressable , market is only 300 million. The rest a Laura’s core been Don’s of passenger volume going forward Also, if you see Lockley, thanks to the i r C t C R S B recently, you see than on suburban traffic, which is basically intercity travel on railways. The number is 3500 million passengers. That is 25 x the number of domestic passengers who have travelled by so that differential is really , really high. Just to some of some of the characteristics within the Indian aviation market. This market is really presents. It is, um, for alliance to charge anything higher than 4000 becomes really difficult because they lose our down demand very quickly. But the movement, the affairs a lower and even though you or load load factors are much higher, it would not dune or make the peak profits because for thousands, roughly the price that has been maintained, their profitability margins, so that also becomes the level of discounting and the number offers that they give becomes very important to see over a period of time Railways will always continue to be one of the biggest competitors as an order means of transport, considering it has 25 times the passenger traffic. And but the biggest aid of your happens in terms of cost was his time, which we in this industry you can expect the top line growth main leader happened due to passenger volume because because of the price incentive in each of the market. So again, something that is happening in today’s market scenario is privatisation of airports So what the Airports Authority of India has been doing so it has already privatised six airports, where in Airport Authority of India maintains only 26% stakes with this public private partnership model has really effective because of which they have started to privatise and invite bids from or airports. So like the Mumbai airport, it’s already been private. So they were invited. Bids for a flea 15 to 20 oppose this summer. So what? What the debate is among some amongst certain industry veterans are more efficient. That these airports become world will lead to is worrying of the airport charges for these airline operators, and if that happens, that it gives them a slightly more leeway in dorms off or a price. The ticket pricing also the choice of leaders influenced by what the competitors using so today, indigo having 50% market share because their fleet is mainly a bus. What happens is to fly and Airbus was is a different model. Let’s a Boeing Unitarian, the pilots in a different manner, and this costs money. So if a new entrant or vice small player in the essence wants to release Kayla, they would ideally prefer to have the same aircraft as the market leader so that they can porch certain by a let’s from indigo and so on Of course, the risk will always be the the reverse could also happened by This is the best way it rather than to train train, you train the pilots and the new aircrafts. Rather than doing that , you have just directly get them from other leasing of across so at least inter Globe aviation. So that is Indigo, Spicer and AirAsia. These three for sort and are used are leasing the aircraft’s and general term of the leases of his 6 to 12 use and Liza rentals. That they land up paying four months is roughly$300,000 permanent depends again word aircraft they use. Are they using and older aircraft or relatively new aircraft? These are some of the things that you really need to keep in mind, so I just end with a court from Benjamin Graham Obvious prospects for physical growth in the business do not translate into obvious profits for investors. There is definitely scope in the alliance industry. In terms of the passenger growth, we see the differentials that is there , monks, countries and even within airlines, verses the railways. But that does not necessarily mean that they will need to a lot more profits and our

performance compared to Sensex on 50. In fact, last year in 2019 it says, the revenue growth at indigo and spices was roughly 20% but there have been delivered at They have made a level they really underperformed, and there was D growth, the level that mainly due to the rise in the fuel prices So when you go back with 50% plus being fixed prices, that doesn’t audience account for the rise in or the volatility of the crude oil or any charges that they have to land up being, and if they’re hedging they using the hedging strategy for for the few, a few the premiums are the land of being over a period of time really accumulated because the P N L suffer before and Happy Diwali and

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