Finally the 3rd Dryleaseflight is in Delhi
I see no credit rating for the company. Is it a cause for concern? Did the management say anything about it?
Afcom does have it, just that the company refused to accept it.
I think it’s wise they did so, BB+ could dent their chances of leasing aircrafts.
Perfect timing ! They’ve managed a BBB+ rating from another agency.
30089-RR-20260108.pdf (174.5 KB)
InterGlobe had a ₹1,000 crore loss due to forex impact from the rupee’s depreciation. Since most aircraft leases in aviation are dollar-denominated, this risk is hard to avoid.
Will Afcom face similar issues? I’m not fully clear on this and would appreciate some insights
Afcom’s case is different. InterGlobe earns majority of the revenue in rupee terms but its expenses (lease + fuel) are in dollar terms hence it will affect more if rupee depreciates. But in case of afcom, it earns in dollar (export services) and hence it should benefit if dollar is appreciating or rupee depreciating.
Q3 results looks better than expected to me. I assumed Q3 to be very similar to Q2. But looks like something is getting better. It could be utilization/pricing or just currency effect. Will wait for the IP for more insights.
MRO is a positive news. Let’s see how markets takes it.
MRO is a surprise move. If they decide to onboard 3rd party customers that’ll be additional revenue, on top of the savings made on maintenance of their own planes.
Just with 2 planes,.their revenue and profit is blasting.. I don’t think the 3rd plane is still in operation. It was came last month yet it’s not functional. Any idea about what’s going on 3rd and 4th plane?
Correct. Third plane isn’t in operation yet. One reason could be, there is still lot of procedural aspect to be taken care of after the plane is procured . Another could be, one of the planes is used as a kind of backup.
Worldwide there is a demand supply gap of planes and it’s getting tough to procure them. This is my understanding, but no updates from the company in this regard
currency effect won’t be more than ~2.3% (based on Q2 and Q3 average USD to INR data). Their Q3 grew by 20%+ QoQ. So must be better utilization/pricing/costs.
Anybody knows how much are the future committed lease rentals the company is liable for? The Amortization of Dry Lease Expenses (Rs.2.67 crore) appearing in the P & L pertains to the pre-operative period. Lease rentals for the two aircraft are being clubbed with other operating expenses such as fuel etc. and shown in a single line item as Operating Cost. This will now go up in Q4 with the third aircraft joining the fray. So I am not sure how to analyze this. I am surprised even the credit rating report does not mention or consider this (i.e. the future committed lease rentals).
Why were the promoter’s past ventures in the same field short-lived? Does the aggressive current guidance warrant caution
Crescent Air Cargo (2004–2006) and Flyington Freighters (2006–2011)
Not sure if this answers your question fully but they did mention in the alpha ideas meet that the lease cost is 200k USD per aircraft per month.
Yes, that’s right. I missed this. That gives an idea. Thank you.
Typically, they Amortize Dry Lease Expenses plus the associated costs of getting the freighter in air. So those will go up in Q4 only with corresponding topline growth. So not sure, if i understood the concern on analysis here.
The links you shared has plenty of info on the reasons for failure.
- Idea was to own aircraft not lease : “The carrier hopes to launch late this year and to start fully fledged operations by March/April next year. But as the 777 freighters will not be delivered until 2009, the carrier will start with leased aircraft. It hopes to seal an agreement in the next month or so, and is looking at Boeing MD-11 or Airbus A300 freighters.”
- Hence planned to spend huge sums of money on owning them : Flyington had in July 2006 reportedly agreed to buy four Boeing 777F cargo planes for about $1 billion (about Rs 5,500 crore now). But subsequently after getting a better offer from rival Airbus, it placed orders worth $2.4 billion with the European plane maker for 12 A330-200F aircraft.
- The planes which never got delivered : However, Flyington could not commence operations because of excessive delays in getting the aircraft from Airbus, according to a complaint it filed with India’s Competition Commission in April last year. In the complaint, Flyington accused Airbus of adopting discriminatory and onerous conditions for aircraft financing
- Mr. Deepak was in mgmt. but not in promoter group (my guess) : Through an agreement dated July 25, the promoters had deposited the original share certificates of 80 lakh equity shares with PVP Capital. While Venkattram Reddy and his brother pledged 26.66 lakh shares each, vice-chairman Iyer pledged 6.66 lakh shares. Also, senior DCHL executive N Krishnan and Deepak Parasuraman, the managing director of Flyington Freighters, pledged 10 lakh shares each.
I think overall, it seems good lesson learnt by Mgmt. because they never mention about owning aircrafts or spending insane amounts in buying them. Current aggressive guidance from mgmt. are related to execution/operation in leasing and covering more routes, which are different in nature than aggression in spending money you don’t have. Setting aggressive guidance and not meeting them while still doing pretty decent in business is ok while market is not pricing it based on those aggressive guidance. It’s available at ~15x kind of earning for current year with good visible growth. So we can bucket the mgmt. into the ‘over guides and meets them with time lag’ category and pay accordingly. I think market is already doing that.