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Best placed to capture growth…
Size does matter
• Jet Airways is India’s largest private sector airline with a domestic
market share of 26.1% in FY11
• The company strengthened its position in the aviation sector by
acquiring Air Sahara (rechristened as JetLite in April 2007
• Currently, JAL operates 116 aircraft (Jet: 97, JetLite: 19) (Owned:
40, Leased: 76), which flies to more than 61 destinations in India
and abroad. JetLite operates predominantly on domestic routes
• With an average fleet age of 5.1 years, Jet Airways has one of the
youngest aircraft fleet comprising Airbus A330-200, Boeing 737-
700/800/900, Boeing 777-300 ER and ATR 72-500
• It has been rated the best on time performer among all other
scheduled domestic airlines with an on-time performance of
94.9%
• It operates at better margins (FY11: 10.8%) vs. peer group
companies (FY11: 2.0%) due to its presence in the high margin
international segment (i.e. 55% of topline) and better cost control
management
Going ahead
• With its differentiated product offerings (Jet, JetKonnect and
JetLite), the company is well placed to capture the demand from
both LCC and FCC segment in India and abroad, thereby
maintaining its market share over the longer term. Therefore, we
see healthy revenue growth of ~16.5% p.a. over the longer term
• By adopting an asset-light strategy (i.e. sale and leaseback
transactions of owned aircraft), selling of non-core assets (BKC
land parcel) and limited capex, it is well positioned to reduce its
debt burden at comfortable level over the longer term
Valuations
We believe the company should command a premium over its peer group
on account of its presence across all matrices, its best services and
focused management team. The stock is currently trading near 52 week
low levels due to the concern on rising jet fuel prices. This, in turn,
resulted from the recent disruption in production of sweet crude in Libya.
With demand continuing to remain healthy, we believe any potential fall in
oil prices will improve the company’s profitability significantly. The stock
is currently available at 1.1x FY11 EV/sales (i.e. at a 25% discount to its
comparable peer matrix). We, therefore, recommend Jet Airways as one
of our top picks in our model portfolio.
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