‘Too much competition’ has caused 60 % of Asian Airline IPOs to lose money

Written by on November 4, 2014 in Airlines

The most successful investor of the 20th century, Warren Buffett, has said to have been proven right again this week, after news reports reveal that 60 per cent of Asian Airline IPOs have lost money ; A decade ago he declared that he would no longer place money in airline stocks since his $359 million disaster in US Airways Group Inc.

Bloomberg news has reported that ‘six of the ten initial public offerings by airlines in Asia are currently trading below their sale prices’. In understanding why this has happened, reports suggest that the Asian airline market has failed ‘to capitalise on the surge in passenger numbers.’

This has shown a big difference between their market, and the U.S. and Europe markets, where a surge of new passengers has led to consolidation.

Marketing chief for Boeing Co. (BA), Randy Tinseth reported the startling statistic that ‘close to half the world’s air-traffic growth will involve Asian routes over the next 20 years. Carriers from the region will require 12, 820 more aircraft, or 36 percent of the global total.’

Alan Richardson , an investment manager at Samsung Asset Management Co. in Hong Kong, has suggested that ‘there’s too much competition in the airline industry. Until you get a shift in demand-supply, you won’t get any meaningful leverage in these asset-heavy companies. There’s always risks investing in airlines.

About the Author

About the Author: After completing a degree in Journalism, I discovered I had a keen interest in content writing. I am now using that to write articles on the transport sector. You can find my posts on Total Rail and Blue Sky. .

Subscribe

If you enjoyed this article, subscribe now to receive more just like it.

Subscribe via RSS Feed Connect on Google Plus Join Our LinkedIn Group Connect on YouTube

Comments are closed.

Top
Geolocation