Monday, December 11, 2017

Jet Airways still facing rough weather as fuel prices & operating expenses weigh

Jet Airways (Jet) continues to face turbulence compared to its peers. The company posted a disappointing set of numbers for the second quarter ended September 2017 marred by an increase in fuel and other operating expenses.

We have a neutral stance on the company on the back of its underinvestment in the domestic market and tepid capacity expansion despite some benefits coming out of cost optimization and agreement between Jet Airways and Air France-KLM.

Quarter in a Snapshot: Fuel cost played spoilsport

Jet 2Q18_1Revenue from operations witnessed a growth of 4.1 percent (YoY) led by increase in revenue passengers (7.4 percent) which partially got offset by the fall in the yield (3.1 percent). Additionally, the load factor witnessed a dip of 20bps over the same quarter last year.

Despite the growth in the top line, the company witnessed a significant decline of 574bps (YoY) in EBITDAR margin. The decline was attributed to the rise in fuel prices (up 254bps as a percentage of operating revenues), aircraft maintenance cost (up 95bps as a percentage of operating revenues) and other expenses (up 343bps as a percentage of operating revenues). The company has, however, been able to manage its employee costs (down 118bps as a percentage of operating revenues).
11/12/17 Nitin Agrawal/Moneycontrol