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Jet Airways: The dark horse

Malini Bhupta/Mumbai 04 Aug 12 | 12:02 AM
 Jet Airways (India) Ltd
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BSE   23 Jul 14 | 01:15 PM

265.40  9.35 (3.65%)

NSE   23 Jul 14 | 01:05 PM

267.00  11.1 (4.34%)

The performance of Jet Airways in the June quarter shows the demand-supply conditions have helped the airline post good numbers. Against a net loss of Rs 198 crore that analysts were expecting, the airline surprised with a net profit of Rs 24.7 crore.

It’s been a strong quarter operationally for the airline as passenger loads and yields improved beyond expectations. Jet Airways posted a revenue jump of 32 per cent on a standalone basis to Rs 4,710 crore, while consolidated revenues (including JetLite) stood at Rs 5,270 crore.

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Analysts say the airline has managed to post a profit of 24.7 crore against a loss of Rs 123 crore in the year-ago period. As load factors improved, the operating costs also came down, helping the company book profits.

In the quarter, the airline’s seat factor improved by 420 basis points to 82.7 per cent from the year-ago period. The total number of revenue passengers carried also improved by 19.5 per cent year-on-year to 4.86 million. Average gross revenue per passenger, too, rose by 10 per cent to Rs 8,090.

The company improved its marketshare in the first quarter of FY13 to 27.9 per cent from 25.5 per cent in the corresponding period last year.

Aviation analyst Rashesh Shah of ICICI Securities, says, “We were expecting yields to improve by six-seven per cent. However, the company posted a much stronger rise in yields. Strong operating performance has helped costs, as a percentage of sales, (to) come down, too. This should continue for a few more quarters if the demand-supply conditions remain tight, even though we see passenger traffic declining."

The company has not only benefited from the capacity cuts seen by the industry but also improved its own efficiency. While it has rationalised loss-making routes on the one hand, its total number of domestic departures has risen by 14 per cent to 37,330 in the quarter.

On the back of strong load factor and robust demand, the airline has managed to expand margins in the domestic and international operations. Operating margins in the domestic operations stood at 15 per cent compared to nine per cent in the year-ago period, while operating margins in the international business stood at 17 per cent against 11 per cent in the year-ago period.

While the current demand-supply dynamics is likely to be beneficial for the company, rising fuel prices and a weaker rupee are major concerns. The airline believes that competitive pricing could also impact revenues in the coming quarters.

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