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

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Jet Airways (JET.BO) Etihad Airways to Acquire 24% Stake in Jet Airways  ::Citi Research

Jet Airways (JET.BO)
Etihad Airways to Acquire 24% Stake in Jet Airways
 Etihad Airways to invest ~US$380m in Jet Airways — to purchase 24% stake (post
money), at a ~32% premium to CMP. Jet has approved the issuance of 27.26m shares
to Etihad Airways at a premium of Rs744.74/sh. Etihad’s investments in Jet Airways will
total ~US$600m, which includes US$70m paid for Jet’s slots at Heathrow and another
US$150m for a majority equity stake in Jet’s frequent flyer programme ‘Jet Privilege’
(pending approvals, to be completed over the next 6 months).
 A textbook transaction for Etihad — Acquiring minority stakes in airlines is
somewhat consistent with Etihad's philosophy – over the past few years it has acquired
stakes in: Aer Lingus (2.99%), Air Berlin (29.2%), Virgin Australia (9%). These stakes
typically foster a closer working relationship – code sharing, joint marketing initiatives –
and appear to be part of Etihad's strategy to augment its international presence.
 Critical for Jet on several fronts — A) Liquidity and solvency - Cash infusion of
~US$450m gives Jet the leeway to pay down high cost debt – we factor in interest cost
savings of ~Rs1.9bn pa, as Jet repays ~US$300-400m of high cost debt. B) Capital
structure – The cash infusion effectively recapitalizes Jet; D/E falls to ~4x. Interest
coverage ratio forecast to rise to 1.8x in FY14 (1.2x in FY13). The perception of Jet’s credit
quality should improve, given Etihad’s backing. C) Strategically – this deal could alter the
complexion of Jet’s international business: i) If Jet were to hub at Abu Dhabi instead of
Brussels (our conjecture), it could effectively utilize its 777 fleet to fly point to point services
to the United States, a critical market from which Jet has almost withdrawn from given cost
pressures. ii) Jet could uplift fuel for its int'l long-haul operations at Abu Dhabi, reducing fuel
costs. iii) Both carriers have the flexibility to continue with existing code sharing agreements.
 New TP of Rs766 — is based on 8.5x Sept 14E EV/EBITDAR (roll forward from Sept
2013) and is based on post money estimates. EPS increase reflects interest cost savings.
We haven’t forecast cash infusion for the Jet Privilege transaction. Nor do we forecast
any synergy benefits with Etihad (fuel cost savings, cost savings by shifting hub from
Brussels to Abu Dhabi, etc). For detailed forecasts, see our note on 7 Aug'12 Jet Airways
(JET.BO) - Upgrade to Buy: Not Yet a 747, But a 545 Key risks: Delays in the transaction

Jet Airways: Hold ::Business Line

Jet Airways (JET.BO) Etihad Airways to Acquire 24% Stake in Jet Airways  Citi Research

Jet Airways (JET.BO)
Etihad Airways to Acquire 24% Stake in Jet Airways
 Etihad Airways to invest ~US$380m in Jet Airways — to purchase 24% stake (post
money), at a ~32% premium to CMP. Jet has approved the issuance of 27.26m shares
to Etihad Airways at a premium of Rs744.74/sh. Etihad’s investments in Jet Airways will
total ~US$600m, which includes US$70m paid for Jet’s slots at Heathrow and another
US$150m for a majority equity stake in Jet’s frequent flyer programme ‘Jet Privilege’
(pending approvals, to be completed over the next 6 months).
 A textbook transaction for Etihad — Acquiring minority stakes in airlines is
somewhat consistent with Etihad's philosophy – over the past few years it has acquired
stakes in: Aer Lingus (2.99%), Air Berlin (29.2%), Virgin Australia (9%). These stakes
typically foster a closer working relationship – code sharing, joint marketing initiatives –
and appear to be part of Etihad's strategy to augment its international presence.
 Critical for Jet on several fronts — A) Liquidity and solvency - Cash infusion of
~US$450m gives Jet the leeway to pay down high cost debt – we factor in interest cost
savings of ~Rs1.9bn pa, as Jet repays ~US$300-400m of high cost debt. B) Capital
structure – The cash infusion effectively recapitalizes Jet; D/E falls to ~4x. Interest
coverage ratio forecast to rise to 1.8x in FY14 (1.2x in FY13). The perception of Jet’s credit
quality should improve, given Etihad’s backing. C) Strategically – this deal could alter the
complexion of Jet’s international business: i) If Jet were to hub at Abu Dhabi instead of
Brussels (our conjecture), it could effectively utilize its 777 fleet to fly point to point services
to the United States, a critical market from which Jet has almost withdrawn from given cost
pressures. ii) Jet could uplift fuel for its int'l long-haul operations at Abu Dhabi, reducing fuel
costs. iii) Both carriers have the flexibility to continue with existing code sharing agreements.
 New TP of Rs766 — is based on 8.5x Sept 14E EV/EBITDAR (roll forward from Sept
2013) and is based on post money estimates. EPS increase reflects interest cost savings.
We haven’t forecast cash infusion for the Jet Privilege transaction. Nor do we forecast
any synergy benefits with Etihad (fuel cost savings, cost savings by shifting hub from
Brussels to Abu Dhabi, etc). For detailed forecasts, see our note on 7 Aug'12 Jet Airways
(JET.BO) - Upgrade to Buy: Not Yet a 747, But a 545 Key risks: Delays in the transaction.

Sizzling Stocks: Jet Airways, Oracle Financial :: Business Line

 

Sizzling Stocks: Pantaloon Retail, Jet Airways ::Business Line

Jet Airways (JETIN) N(V): But for the INR, 4QFY12 trends encouraging  HSBC Research,

RPower, Hindalco, GSPL, Jet Airways, reports by Kotak Sec PDF links

Technical Query Corner: Lupin, MMTC, NTPC, DLF, Jet Airways, L and T, :: Business Line

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Kindly enumerate on the long-term outlook for L&T purchased at Rs 1,928.

R.M. Kumarappan

Larsen and Toubro (Rs 1,161.5): Larsen and Toubro has long-term resistance in the zone between Rs 2,200 and Rs 2,400. It peaked in this zone in November 2007 and again in November 2010. The stock is in a long-term decline since its November 2010 peak that has resulted in a decline of 55 per cent.

Key long-term support for the stock is at Rs 1,196. The stock declined below this level but is trying to form a base around the psychological support at Rs 1,000. This level also coincides with the downward gap formed in May 2009.

Decline below Rs 1,000 can prove disastrous for the stock since the next support is far below at Rs 557. Investors can, therefore, consider divesting their holdings on decline below Rs 1,000.

Resistances for the months ahead would be at Rs 1,460 and Rs 1,752. Long-term ceiling will continue to be at Rs 2,200.

Jet Airways (Rs 358.5): BUY : Business Line

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Aviation: Good times around the corner, courtesy Kingfisher :: Kotak Securities PDF link

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Aviation: Good times around the corner, courtesy Kingfisher
` Yields are strong in 4QFY12 versus usual seasonal trends
` Strong trend in yields to continue; Kingfisher unlikely to restore operations
` Industry capacity to grow at low single digit at best; PLFs and yields to
remain strong
` We have a BUY rating on SpiceJet
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily20032012.pdf

Jet Airways: Cash-flow issues to the fore : Kotak Securities (pdf link)

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http://www.kotaksecurities.com/pdf/indiadaily/indiadaily27022012.pdf

Jet Airways (JETIN)
Others
Cash-flow issues to the fore. As per our understanding, Jet Airways is facing cashflow issues with banks denying incremental working capital limits. The Kingfisher
episode has made banks wary of lending to other leveraged airlines. Media articles
suggest that the company has sought government intervention to get finance from
banks. In our view, cash-flow issues could limit turnaround potential for the company.
Hence, we recommend investors to look at players with lower leverage (such as
SpiceJet) as a play on a potential turnaround in the sector. We have reduced our
estimates and downgraded Jet to SELL (ADD earlier) with a revised target price of Rs280
(Rs380 earlier) at 8.7X FY2013E EBITDAR.

Jet Airways: Cough syrup for ICU patients; not enough :: Kotak Securities

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Jet Airways (JETIN)
Others
Cough syrup for ICU patients; not enough. In our view, the Government’s proposal
to allow airlines to import fuel directly offers limited benefits. The proposed savings on
state sales tax (~24% on average) would be offset by costs of leasing the infrastructure.
Besides, there would be incremental working capital limits, which would be difficult for
most players. We downgrade the stock to ADD (not REDUCE) due to hope of a cyclical
uptrend and more useful reforms, given that the Government has shown willingness to
act. We have revised our TP to Rs380 (marginally increased the multiple).

Jet Airways- Too fast, too soon; company update; downgrade to Hold:: Edelweiss,

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Jet Airways (JETIN IN, INR 336, downgrade to Hold)

Jet Airways (Jet) stock is up 40% since our sector update, Light at the end of the tunnel, dated November 17, 2011, and has nearly doubled from December lows. We believe the stock price has overreacted to the news on approval for direct ATF import by the Empowered Group of Ministers (EGoM). We understand there are several logistics issues, additional costs and possible taxes which could possibly off set most of the benefits of lower ATF prices. Further, improvement in yields, driven by easing competitive scenario, has clearly not been enough to offset the stubbornly high oil prices (INR terms). We continue to believe that a fall in oil price remains the key to a rebound in Jet’s performance. We downgrade to ‘HOLD’ with a TP of INR340 (INR295 earlier).    

Limited benefit likely from ATF import 

While allowing ATF imports is sentimentally positive, we note that there could be additional costs in terms of transportation, logistics, storage etc., which could partially offset the benefit of cheaper imported ATF (25-30% lower). Further, there is a possibility of state governments levying an entry tax (as much as 10-15%) to recover sales tax loss. Availability of requisite infrastructure is another issue.  

Sharp rise in yields highly unlikely

Assuming oil prices remain at the current level through FY13, Jet will need to take a yield increase of nearly 10% in domestic operations (3% in international) to earn meaningful profits (INR2.5bn). This, we believe, is highly improbable given that yield hike has been limited to 2-3% in most years. Further, a sharp rise in yield could impact demand significantly, in our view. 

LINK:

Outlook and valuations: Fall in oil prices key; downgrade to ‘HOLD’

We continue to believe that the industry demand-supply scenario remains favourable on resilient demand (10-12%) and limited supply growth (single-digit) given stressed balance sheets of key players. Hence, Jet will stand to benefit from a potential fall in oil prices – a 1% fall increase EBIDTAR by 3%. Our TP of INR340 is based on 7.25x FY13E EV/EBIDTAR which leaves limited room for upside. Hence, we downgrade to ‘HOLD.’

Jet Airways - Too fast, too soon; company update; downgrade to Hold

Buy Jet Airways ; Target : Rs 330 :: ICICI Securities

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L o w e r   d o m e s t i c   y i e l d s ,   w e a k   r u p e e   d e n t   m a r g i n…
Jet Airways (JAL) reported consolidated revenues of | 4469.5 crore (up
13.1% YoY, 21.3% QoQ) that were marginally better than our estimated
revenues of | 4272.3 crore. However, high fuel prices and continued
depreciation of the rupee impacted its operating performance. As a result,
JAL reported a consolidated operating loss of | 67 crore. The domestic
segment (45% of topline) reported operating loss of | 101 crore due to a
marginal drop in yields (down 0.5% YoY) and higher fuel and other
operating costs due to sharp rupee depreciation. The international
segment (55% of total revenues) performed well with revenues in this
segment recording growth of 12% YoY and EBITDA of | 64.4 crore due to
balanced demand supply mix. Besides operational income, JAL earned a
profit of | 179 crore on sale and lease back transaction of aircraft engines
(| 76 crore) and sale of development rights of BKC land deal (| 103 crore).
In addition, JAL also adopted revised accounting guidelines for forex
transaction that resulted in unrealised gain of | 179 crore for the quarter.
This, in turn, helped the company to narrow its losses by | 360 crore for
the quarter.
ƒ Lower domestic yields along with weak rupee dent margins
During the quarter, yields for the domestic segment remained under
pressure partly due to competitive pricing strategy adopted by
major competitors and partly due to increase in the supply (ASKM).
As a result, Jet (domestic) and JetLite’s revenue per pax declined
4.8% and 0.9% YoY, respectively, despite healthy demand. A
weakening rupee also added further pain that in turn led fuel and
other operating cost to increase by 58% and 36% YoY, respectively.
V a l u a t i o n s
We expect the fleet utilisation level to improve by 7% in FY13E due to
stable demand and expected supply cuts by major players in the industry.
The company is focusing more on debt reduction through sale of its noncore assets and sale and lease back transaction of owned aircraft. Further,
we believe any positive policy reforms (like allowing direct import of ATF
or reduction in sales tax, etc.) would improve its earnings visibility further
over the longer term. However, a weak rupee remains a concern in the
short to medium term. Hence, we remain cautiously positive on the stock
with BUY rating and a target price of | 330 (i.e. at 1.0x FY13E EV/sales)

Jet Airways (India) :: Revenue growth intact; lower yields higher ATF hurt PAT ::GEPL

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Revenue growth intact; lower yields higher ATF hurt PAT
• Jet Airways (Jet) reported a 14.4% Y-o-Y growth in standalone passenger revenues to `31.5bn
driven by a 10.4% Y-o-Y growth in RPKM and 3.6% Y-o-Y growth in yields (revenue/RPKM). The
8% Y-o-Y growth in cargo revenues and 14% Y-o-Y growth in other operating revenues led to a
13.4% Y-o-Y rise in total income to `39.4 bn.
• The standalone passenger load factor (PLF) declined by 150bps Y-o-Y to 77.8% as the capacity
(ASKM) grew 12.6% Y-o-Y with fleet addition.  Average fleet size rose to 101 in Q3FY12 as
compared to 90.8 in Q2FY12 and 91.5 in Q3FY11.
• Fuel costs rose by 60% Y-o-Y resulting in the EBITDAR margin declining to 5.3% and the
company reporting an EBITDA loss for the second consecutive quarter.  EBITDA loss stood at
`366 mn as compared to an EBITDA profit of `6.3bn in Q3FY11.
• The company reported a standalone net loss of `1.0 bn in Q3FY12, which was cushioned by a
other income and exceptional item component.
Result Highlights
Rupee impact dragged International business despite better operations
The international revenues grew by 13.9% Y-o-Y while domestic business saw a 12.7% Y-o-Y growth.
The yields in the international segment grew by 7.3% Y-o-Y as PLF stood at 79.2%. In the domestic
segment yields declined by 0.5% Y-o-Y and the  PLF stood at 75.2%. The international business
witnessed its lowest EBITDA in three years with margins at 2.9% due to the rupee depreciation.
Fuel cost pressure continues to create headwinds
With the current competitive environment, yields remained low across segments even as fuel prices
continued to surge in Q3FY12. The domestic arm  saw fuel cost surge 56.3% though seasonality
ensured that fuel cost as a percentage of sales fell to 41.1% (46.4% in Q2FY12). Similarly,
international fuel cost rose by 62.4% Y-o-Y resulting in fuel cost as a percentage of sales rising to
47.2% in Q3FY12 (43.8% in Q2FY12 and 33.1% in Q3FY11).
JetLite results better than Jet’s full service domestic business
JetLite’s total revenue grew by 9.7% Y-o-Y to `5.3 bn led by muted 0.7% Y-o-Y rise in RPKM coupled
with a 5.1% Y-o-Y rise in yields. The division saw a rise in yields after three consecutive quarters.
The load factor however, declined to 78.6% in Q3FY12 as compared to 82.6% in Q3FY11.
Valuation & Viewpoint
The outlook for the sector remains weak with currency headwinds and high ATF prices. However,
cash generation and debt repayment through sale-and-back and BKC land sale should reduce the
debt burden. We expect any drop in fuel prices to substantially improve the operations of the
company. The stock is currently trading at 8.4x its FY13E EV/EBITDAR; a significant discount to its
other peers. Hence, we expect the stock to be the first to benefit in the sector with any
positive change in the macro environment.

52-WEEK FLOP: JET AIRWAYS:: Business Line,

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Similar to its peers, Jet Airways was done in over the past year by a cocktail of rising fuel cost, weakening rupee and inability to raise fares.

With the price of crude oil shooting above the $100 a barrel mark, and the rupee depreciating around 12 per cent against the US dollar, oil marketing companies repeatedly raised the cost of aviation turbine fuel.

The fuel is today around 30 per cent costlier than what it was a year ago. While costs soared, the airline found itself selling tickets below cost due to predatory pricing by some players. This caused losses to balloon, and in the September quarter, Jet Airways' loss was as high as Rs 714 crore.

While Jet Airways along with JetLite has held on to its position as the largest carrier in the domestic skies, this has been of little consolation, considering the heavy losses posted by the airline for three consecutive quarters.

Another concern about the airline has been its weakened balance sheet due to high leverage levels and its inability to raise funds to pare debt. The company's auditors have also raised the red flag in this regard.

The government's proposed move to allow foreign airlines to invest in Indian carriers may provide respite, but surprisingly Jet Airways is said to be opposed to the proposal.

JET AIRWAYS (INDIA) High oil prices, competition hinder wings :: Edelweiss

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Jet Airways (JAL) reported a Q2 loss of INR5.6bn as against our estimate
of INR3.1bn loss. High oil prices coupled with irrational pricing by
competition continued to impact results with yields falling lower than
expected. Outlook for H2FY12 is improving – capacity cut by Kingfisher
(KFA) has triggered a 20% rise in yields in November. BKC land sale and
proposed sale and leaseback (SLB) of aircraft will help Jet improve its
Balance Sheet. Retain ‘BUY’.
Weak Q2 driven by high oil prices, lower yields
Due to the heightened competition, Jet could not pass on the impact of higher oil
prices which shot up 35% YoY (flat sequentially). However, yields were lower by ~4%
YoY for domestic, flat for international operations and down 15.5% YoY for JetLite. As a
result, EBIDTAR margins were under severe stress, coming in at the lowest in the last
12 quarters. Excluding exceptional forex losses of INR2.6bn, net losses came in at
INR5.6bn.
Outlook better for 2H
As per the management, fares have surged 20% sequentially in November. With KFA
cutting routes, JAL is witnessing a strong inflow of corporate travelers. The
management is taking steps to cut costs per ASKM by 8%-10% over a year along with
the BKC land deal and SLB transactions to reduce debt levels. Due to the weak H1 and
stubbornly high fuel prices, we cut our FY12 and FY13 EBIDTAR estimates by 50% and
13%. We maintain our FY13 average yield improvement estimates of 5% and load
factor estimates of 80%-81%.
Outlook and valuations: Fall in oil prices key; maintain ‘BUY’
We believe that the industry supply is unlikely to exceed 8%-10% over the next year
given the distressed balance sheets of most large players. With demand remaining
strong in high double-digits and the industry operating at peak loads, Jet stands to gain
from any potential fall in oil prices. It would also benefit from the deleveraging of its
balance sheet on account of BKC land deal and aircraft SLB transactions. In line with a
cut in our estimates, we trim the target price to INR400 (earlier INR610) by rolling over
to FY13 and continuing to value Jet at 7.25x EV/EBIDTAR.

Jet Airways : 2QFY12 - Conference Call Takeaways Citi Research

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Jet Airways (JET.BO)
Alert: 2QFY12 - Conference Call Takeaways
 Competition remains intense — On both international and domestic operations.
Mgmt noted that on international routes, entry of the domestic LCCs on West Asian /
SE Asian routes impacted yields slightly in 2Q (though these have recovered into 3Q).
Within the domestic market, Air India’s ‘fare wars’ impacted 2Q yields. Looking ahead,
management notes that yields in Nov improved ~18-20% over Oct levels (in line with
Sept yields) – this implies 3Q yields should improve ~14% Q/Q – impressive, but less
than the typical 18-20% seasonal uptick witnessed in the past years.
 Debt levels steady, cash flows augmented by asset sales — Management notes
that currency translation-inflated debt by ~Rs10bn. Over the next 6 months, ~Rs15bn
of debt has to be repaid, which will be partly funded through cash from the Godrej –
BKC transaction (~US$100m) and sale and lease back (US$150-300m).
 Cost Restructuring: a long-term positive — Management noted that it plans to cut
costs (ex fuel) / ASK by 5-10% pa. Areas targeted are IT overheads, manpower
expenses, better aircraft utilization, et al. We think this is a positive, and necessary,
given that oil prices remain sticky, and cost structures of the aviation sector in India
must reflect the ‘new reality’ – a price sensitive market, within which the corporate
travel market has a far lower proportion today than 5 years ago (corporate segment
accounts for ~33% of Jet’s revenues – at the time of Jet’s IPO it was estimated that
~80% of passenger travel was business related). One tangible improvement: that we
highlight - fuel burn / block hour that’s improved by ~10% in the past four years.
 Brand repositioning — Management expects operations to be consolidated into two
different formats: full service and low fare. Before it embarks on this initiative, it needs
to reduce structural costs to ensure the low fare model is sustainable over the long
term – we think this is critical given that 75% of seats offered by Jet are low cost now.
 Maintain Sell — Jet is interestingly positioned – recent developments from a
competitive perspective implies some relief for its full service business. However, we
think oil and a depreciating rupee trump possible market share gains, for now. Longer
term, we like management’s focus on cost reduction initiatives as the business is
realigned to the current demand environment.

Jet Airways (JET.BO) 2QFY12: Results Reflect Impact of Adverse Macro Environment  Citi Research

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Jet Airways (JET.BO)
2QFY12: Results Reflect Impact of Adverse Macro Environment
 Recurring loss at Rs 4.4bn slightly higher than estimates — Operating revenue (exleasing
income) at Rs ~31.9bn was 7% below our estimates, reflecting a ~250bps Q/Q
decline in dom PLF. EBITDAR at ~Rs669m was ~19% below estimates- primarily a result
of Rs 1.1bn EBITDAR loss in the domestic segment (vs CIRA est of Rs 443m). Reported
loss was much higher at Rs 7.1bn, reflecting ~Rs 2.7bn of forex loss.
 Domestic Operations: EBITDAR loss- first quarter post 2QFY10 — Overall domestic
industry capacity grew 20%YoY, in line with pax growth. Jet's market share (ex-JetLite)
dropped ~140bps YoY -reflecting increased competitive intensity. Total op revenue / RPK
(including surcharge, baggage etc) dropped ~10% YoY, resulting in EBITDAR loss of ~Rs
1.1bn (Rs 2bn/Rs 1bn profits in 2QFY11 and 1QFY12 respectively).
 International Operations: The silver lining— While international departures rose a
healthy 12%, ASKs rose ~10% YoY, reflecting an increase in short-haul flights. A slight
(~2%) miss in revenue estimates was compensated for by a very strong EBITDAR
margin of ~9% (+420bps QoQ; CIRA est: 2%). A steady PLF of ~81% and slightly
better yields could not compensate for a ~52% growth in fuel costs (~10% YoY growth
in block hours). A YoY margin drop of 1,100bps reflects the adverse macro environment
for the industry rather than Jet's relative positioning.
 JetLite — Similar to Jet's (9W) domestic operations, JetLite's EBITDAR margins also
slipped ~20ppt YoY, reflecting increased cost pressures. PLF was steady at ~75% but
yields dropped ~13% YoY, resulting in an EBITDAR loss of ~Rs 419m. JetLite's market
share increase by ~60bps YoY and QoQ as its share in Jet's overall domestic
operations increased at the expense of overall consolidated yield.
 Maintain Sell — Outlook remains challenging for the sector, given sustained high
crude oil prices and a depreciating INR. Cash generation through sale and lease-back
income should enable Jet to ensure that debt levels don’t burgeon past current levels
(Rs 161bn). We remain sellers, given fairly challenging domestic conditions, and limited
visibility on crude oil prices falling.