Stock Review: Jet Airways

 

India's biggest private airline Jet Airways reported a robust increase in yield and lowered its interest burden in the quarter ended June, an indication of its improving business performance. However, intense competition from low-cost carriers, seasonality of business and rising fuel cost continue to be major challenges for the airline in the upcoming quarters.

In April-June, Jet Airways reported a net loss of . 123 crore compared with a net profit of . 3.52 crore a year earlier. Profit in Q1 was dented by a sharp 33% increase in prices of aviation turbine fuel. Net sales during the period stood at . 3,320 crore, up 20% from last year. Earnings before interest tax depreciation amortisation and rentals , a measure of the operational performance, fell 45% from a year ago to . 328 cr.

Rising competition from low-cost private carriers continued to weigh on the company's earnings. The quarter saw most low-cost carriers improving their market share while full-service airlines such as Kingfisher Airlines and Jet Airways witnessed a decline.

However, despite losses posted during the quarter, the airline showed considerable improvement in some crucial financial parameters such as yield, aircraft utilisation and interest burden. On a yearon-year basis, the company's total yield, including domestic and international operations, moved up 7% to . 3.78. Yield is the revenue an airline earns per passenger per kilometer. For domestic operations, the yield increased by 10% to . 5.50. Jet is also reaping the benefits of its debt recast, which it undertook last year by converting its rupee loans to dollar loans. This has helped the company reduce its interest cost by 21% in June quarter from the previous year.

Going ahead, Jet Airways' growth would depend a lot on how it cashes in on the rising demand for low-cost air travel as fliers are more and more looking out for cheaper flying options. This includes not only leisure travelers, but also business fliers who are opting for lowcost airlines prompted by a spate of cost-cutting across industries. Jet's low-cost carriers are JetLite and Jet Konnect.

In the June quarter, JetLite reported a load factor of 80.1% while the full-service Jet Airways had a load factor of 78.5%. Though focus on low-cost carriers will lead to decline in yield, but it will boost volume growth. At present, Jet's debtto-equity ratio has improved to 1.87 from 2.05 in January-March.