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

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


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.