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Aviation
�� Jet Airways is likely to see a sequential improvement in profitability as the
price pressures seen in 4Q ease. However, high oil prices and seasonal
softness in loads will ensure that the company remains loss making.
�� In the domestic business, average load factors in April-May were similar to 4Q
while yields are expected to have increased 10-12% QoQ as aggressive
pricing seen in 4Q came to an end in April.
�� The international business will experience a slight pickup in profitability as oil
price rises are compensated by modest hardening in yields.
�� Passenger growth has remained strong on a yoy basis; our positive
recommendation on the stock is predicated on price discipline in the sector
holding amidst a tight demand-supply situation in 2HFY12.
�� Our forecasts do not assume any FX gains for the quarter and no sale and
lease back of aircrafts being concluded.
Delays in fund raising remain a concern. While cash flows are adequate to
meet present obligations and the short term borrowing costs have fallen due
to a refinancing, the proposed QIP is on hold due to approval being withheld
by the government. Volatile oil prices add to the risk. Aircraft sale and
leaseback as well as land sale in Mumbai may alleviate funding concerns.
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