Strong September show by Jet Airways

Anand Kalyanaraman BL Research Bureau | Updated on January 23, 2018

Jet Airways on firm ground

Low fuel cost, high passenger numbers buoy profit

The fiscal 2015-16 is turning out to be a very good one for Jet Airways. After a gap of eight years, the airline has registered profit in the recent September quarter, traditionally a lean one for the Indian aviation sector. For Jet, this is the second consecutive quarter of being in the black after posting profit in the June 2015 quarter too.


Crude benefit

The good show is thanks to the combination of low aviation turbine fuel (ATF) cost and robust growth in passenger numbers. The crash of crude oil has pushed down the cost of ATF. As a percentage of sales, Jet’s fuel cost dropped to 28 per cent in the recent September quarter, from 42 per cent in the year-ago period. It was also lower than the 30 per cent in the June 2015 quarter.


The airline’s passenger traffic growth of about 32 per cent to 57.8 lakh passengers in the September quarter was much higher than the overall 20.5 per cent domestic industry growth year-on-year. Average passenger fares fell nearly 16 per cent year-on-year due to price cuts. But this was more than made up by the strong traffic growth. Ergo: the airline’s standalone revenue rose more than 10 per cent year-on-year in the quarter. This, along with a decline in expenses, pushed up reported profit nearly 26 per cent year-on-year to Rs 87.6 crore. Profit growth in the recent September quarter is, in fact, much higher — the year-ago period’s profit was due to surplus on sale of the frequent flyer programme but for which the airline would have posted a loss then.


While the international operations — the company’s focus area — accounts for the chunk (about 62 per cent) of revenue and profit, the growth in the domestic business was much stronger in the September quarter. The operations of subsidiary JetLite (which is to be merged with Jet Airways) continue to shrink, but lower costs helped it too to reduce losses in the September quarter — this does not form part of the reported quarterly performance though.


Tepid stock reaction

Despite the good results, which were announced after market hours yesterday, the Jet Airways stock declined about 1 per cent in today’s trade. That’s perhaps because the stock has already had a solid run, gaining nearly 75 per cent over one year, likely in anticipation of benefits from improving passenger numbers and lower costs. Also, while the airline’s performance has been improving, the standalone net worth still remains negative at a formidable Rs 3,900 crore, while debt levels have inched up from Rs 10,252 crore as in March 2015 to Rs 10,444 crore as of September-end.




Published on October 29, 2015

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