Avoid Investing in Airlines stocks in India - stick to basics

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Sorry for posting after a long time...busy due to preoccupations. anyways here is my post on Aviation Industry:
Since Indian government has passed FDI decision for Aviation Industry. By which now foreign players can buy stake up to 49 percent in Indian airlines, But the question arises is will any Foreign Airlines invest in Indian aviation market which is highly taxed which basically means government still thinks that travelling as fast as Airplane is only for rich people and hence should be taxed heavily(which is 100 percent wrong in era of globalization).

So In present environment I suggest to avoid Airlines stocks to invest in as it is highly risky sector with wafer thin profit margins(for a company working ideally). Now since management of Airlines in India is substandard (not very intelligent/intellect) hence we cant see them turning their balance sheets into green either.

I was checking website of Federation of Indian Airlines and it is showing a disastrous picture of Indian aviation market due to policies of government. Now all of you might be thinking why one should avoid Aviation sector stocks in india? Here are the reasons supporting the same thinking:

1. Taxes on ATF in india is too high: ATF price in India is 77 percent higher then International ATF price ie currently it is Rs. 37,800 / kilolitre whereas international price is Rs. 21,400 / kilolitre, This brings in additional burden for Indian domestic carriers which can be negated if Aviation ministry makes some logical changes in their policies.



2. Service tax on landing, airport & air navigation fees:: We all know that Airports are vital for growth of economy like that of India and hence development of Airports should top the list of high priority requirements for the Aviation Industry, but this should be done by using some realistic taxing which should be such that Airlines are not further burdened(after ATF tax burden), presently 10.2 percent tax is levied on Airports by Government. This makes yet another reason to avoid investing in Aviation stock(until tax percent is reduced)

3. Sales Tax: This is another ridiculous taxing strategy used by duffer policy makes which keeps sales tax on Turbo pop type aircraft lower then the regional jets. So does government wants that no Jets should fly?? and only planes with less then 100 seats should ply in Indian airspace.

4. Tax on Leased Aircraft: Adding fuel to fire is governments decision to withdraw withholding of tax on leased aircraft from march 2007 onwards which means further burden of Airline sector thus giving one more reason to avoid investing in them due to over taxation.

5. Fringe benifit tax: From 2005 onwards government has levied fringe benefit tax on airlines which is still applicable on inflight entertainment, passenger hotel accomodation and crew expenses, hence it comes as additional burden on airlines thus affecting their profitablity further.

All the 5 reasons explained above shows that taxes in Aviation sector companies is in excess of 50 percent which makes it a sector to avoid investing in till government changes policies, So dont become to optimistic on Aviation sector after hearing FDI news about Aviation. The sector cant turn their balance sheets in green till these 5 taxing norms are relaxed to realistic level by Indian Government.

Hence I suggest to stay away from Aviation stock for saving your hard earned money!