Jet Airways (India) - Significant Improvement in Operating Metrics; Result Update Q2FY15 :: Edelweiss, PDF link

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Jet Airways (JAL) reported positive net profit of INR698mn for Q2FY15 for the first time since Q3FY13. The positive net profit was however led by ‘other income’ of INR2435mn and ‘surplus from slump sale of Jet Privilege Frequent Flyer Program’ (JPFFP) of INR3,050mn. Fuel costs, as a percentage of revenues, however remained constant; we believe the drop in ATF prices will be visible in earnings from next quarter. We continue to like JAL as it has shown improvement in operating metrics and delivered better performance with focus on international routes. We have lowered our TP to INR391 (INR403 earlier) due to modeling changes.

Focus on international operations, a positive

Passenger load factor (PLF) for international operations was 82.7% (84.5% in Q1FY15), marginally higher than 82.6% in Q2FY14 even with high capacity as ASKM’s were higher 18% YoY as net departures increased 15% YoY. In the domestic market, high passenger load factor of 70.7% (up from 70.3% in Q2FY14) was due to route rationalization and lower capacity as ASKM’s were low 7% YoY as net departures reduced 5% YoY. Focus on better yielding international routes has delivered higher EBITDAR of INR3,587mn from negative INR40mn in Q2FY14.

Change in strategy paying off

1) focused expansion in international routes; 2) single brand strategy; 3) synergies from Etihad deal; and 4) similar configuration airplanes will help JAL deliver even better operating performance going ahead. JAL reduced non-fuel cost by 4% YoY in Q2FY15. We see green-shoots from the strategy shift to continue for JAL.

LINK
https://www.edelweiss.in/research/Jet-Airways-(India)--Significant-Improvement-in-Operating-Metrics;-Result-Update-Q2FY15/27549.html