Jet Airways (India) Ltd’s share price jumped around 2.4% to close at Rs485 each on Tuesday, thanks to several positive triggers. The firm clocked a 26% rise in domestic passenger traffic and a 30% rise in international traffic for January, even as a Mint report said the airline was looking to tie up with global logistics solutions provider FedEx Corp. for a dedicated cargo airline.
The bullish sentiment is the result of an uptrend in passenger traffic of late, on an annual basis. November and December showed a rise of 33% and 53%, respectively, in domestic traffic, and 19% and 28%, respectively, in international traffic. But February and March, normally leaner months, will determine the performance in the fourth quarter and the full year.
Analysts are positive on the sector. Mahantesh Sabard of Mumbai-based Centrum Broking Private Ltd says: “The 2009 calendar year saw a growth of 7.3% in domestic passenger traffic. By March, the fiscal year growth would increase to about 15%.”
Jet’s tie-up with FedEx will not see significant accretion to revenues, as this business is barely 3-4% of the revenue of top airline firms.
It may not be prudent for investors to jump in yet as full-year results would still see losses. There is little progress reported on a targeted qualified institutional placement of about $400 million (Rs1,868 crore). Some analysts reckon there are few takers at this stage for the issue.
Jet’s stand-alone profit was around Rs106 crore in the third quarter, against a loss of Rs214 crore a year earlier. This was despite a 4% decline in revenue. Higher traffic and passenger fares, and lower fuel costs, helped. Given the buoyancy in air traffic and stability in fuel costs, the fourth quarter could be profitable too. But the key will be revenue growth.
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