Falling ATF prices provides glimmer of hope for Jet Airways

New Delhi: After months of despair and struggle to stay afloat due to a sharp spurt in the price of Aviation Turbine Fuel (ATF), the recent fall in the ATF
prices has provided a glimmer of hope for the domestic airlines in India. ATF prices, which were trading at Rs 71,759 per kilolitre (in Mumbai region) in June last year, have fallen to around Rs 31,000 per kilolitre recently.
The question is: will the fall in price of ATF be enough to enable leading players such as Jet Airways, Kingfisher Airlines and SpiceJet to break even in the December '08 quarter. ETIG does a reality check.
Our analysis and earning projections for Jet Airways, show that lower out-go on fuel cost due to fall in ATF prices may enable the company to report a modest net profit of around Rs 50 crore in the December quarter. A similar exercise is difficult to do for its other two listed peers -Kingfisher Airlines and Spicejet, due to paucity of traffic and financial information. However if Jet Airways turnaround in the third quarter, there is a strong likelihood that its competitors do the same as most of them have similar cost and revenue structures.
In our analysis, we have assumed a 20% Q-o-Q fall in Jet Airways' fuel cost per revenue passenger in the third quarter of FY '09. In September '08, the company's fuel cost was around Rs 6,000 revenue per passenger. We estimate it to fall to around Rs 4,800 in Q3 which is comparable to the figures reported in June '08 quarter. A more than estimated fall will give a further boost to operating and net profit.
12/01/09 Rajesh Naidu/Economic Times

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Categories: Jet Airways Jan 2009