Saturday, August 11, 2018

Once a frontrunner, what is wrong with Jet Airways?

Budget airlines such as IndiGo, GoAir and SpiceJet expanded exponentially in the past decade, giving first-time flyers a new opportunity and middle-class families an alternative to full-service carriers that offered lounges and free meals on board. India, the world’s fastest-growing major aviation market, is also one of the toughest in which to survive, with premium carrier Kingfisher Airlines collapsing and legacy Air India needing repeated state bailouts as ultra-low fares fail to cover their costs.

“Jet Airways is facing challenges on all fronts,” Bloomberg Intelligence’s Singapore-based analyst Rahul Kapoor said. “The rise in oil prices is having a double whammy on their earnings. They already have a sparse balance sheet compared with other Indian carriers.”

India is one of the toughest markets, where airlines are forced to sell tickets at base prices of as low as Re 1 to attract the fastest growing middle class in the world. Kingfisher Airlines, started by Indian tycoon Vijay Mallya in 2005, was one of the nation’s leading carriers until it was grounded in 2012 amid mounting debt. Indian airlines are among the biggest customers for the single-aisle planes made by Airbus and Boeing Co.

Mumbai-based Jet Airways had total debt of Rs 9,430 crore, and cash and equivalents of Rs 320 crore for the year ended March 31, 2018, according to Bloomberg-compiled data. The firm’s total debt ballooned to 55.4 times earnings before interest and tax as of March 31, compared with 4.9 times the previous year, the data showed.
11/08/18 Bloomberg/Times of India