The stock of Jet Airways , a leading player in the airlines industry, has more than doubled in the past one year against the 32% gain of the benchmark Sensex . It posted a small profit in the September quarter against the loss of last year. But since the expectations were already built in, the stock didn’t react much.
For the September 2010 quarter, the company reported a net profit of Rs 12 crore against a Rs 400-crore loss in the year-ago period. On the operational front, th ecompany’s earnings before interest, depreciation, tax and rentals (EBIDTAR) grew by 159% y-o-y to Rs 686 crore in the September 2010 quarter. This shows that the full service carrier’s focus on operations rather than capacity addition has paid off. A favourable development for the company in the September quarter was the appreciation in the yield-revenue per paid passenger per kilometre. On a year-on-year basis, the company’s yield for the quarter increased to Rs 3.5 from Rs 3.2.
The growth momentum witnessed in the comparatively slack season of June and September quarters is expected to boost the corporate earnings in the busy season in the second half of the fiscal. The annual holiday season in the December and March quarters is expected to be exceptionally good for the airlines industry this year.
Jet Airways has already launched 46 new flights across various locations to capture the demand growth. Besides this, the company is also planning to straighten up its balance sheet. In view of the delays in government approvals in its proposed QIP of $400 million, it has laid out a three-pronged approach to reduce its debt burden of nearly Rs 14,000 crore. It would convert its rupee loans into dollar-denominated ones, raise money through the development of land it owns in Bandra-Kurla and sell around 20 planes it has and lease them back.
Conversion of rupee loans, which will take the least time to consummate, will save the company around Rs67 crore in annual interest. Thanks to the increasing passenger growth, range-bound movement of crude oil prices and flexibility to shift to low-cost carrier model in tough times, airlines stocks in the past one year have garnered tremendous interest.
Experts believe that this optimism over airlines companies would continue in the coming quarters considering the approaching holiday season and the momentumalready seen in the growth in the number of passengers travelling.
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