This is turning out to be a rather unusual year for aviation. Take Jet Airways (India) Ltd’s financial results for the September quarter. The company has put up a rather decent set of numbers in an otherwise traditionally leaner three months.

Stand-alone Ebitdar (earnings before interest, taxes, depreciation, amortization, and aircraft and engines lease rentals), a measure of profitability for aviation companies, has increased to 881 crore, higher than 870 crore in the June quarter.

This is unusual because the June quarter tends to be better than the three months to September. In fact, in the past five years, this is the only quarter where the September quarter Ebitdar is higher than that ended in June (see chart).

Of course, falling crude oil prices have played a major role in this. For the September quarter, fuel expenses as a percentage of revenues stood at 27.5% against about 30% in the June quarter.

It’s not surprising considering that average fuel prices remained sequentially lower as well. Jet Airways’ Ebitdar margin remained steady sequentially at 16.7%, which is commendable. This could mean InterGlobe Aviation Ltd-run IndiGo, with its low-cost structure, can be expected to do better given the gains from declining crude oil prices. Already, its June quarter Ebitdar margin at 37.4% was far higher than expectations.

Jet Airways’ numbers reflect its operational strength. In fact, pre-tax earnings before exceptional items was higher at 133 crore, against 94 crore in the June quarter. The company’s domestic business revenue and Ebit (earnings before interest and tax) growth was much better than its international segment during the quarter. Directorate General of Civil Aviation data shows passengers carried by domestic airlines during January-September reported an encouraging 20% year-on-year growth.

What of the stock?

Shares of Indian aviation companies have been on fire for sometime now and Jet Airways is no exception. Its shares have gone up by three-fifths from its annual low in June, to 408. Sure, the company had also delivered a good June quarter this time and, more importantly, Brent Crude prices dropped 29%. That apart, market leader IndiGo’s forthcoming listing on stock exchanges has also led to a re-rating of the sector.

While that augurs well, Jet Airways’ balance sheet continues to be a concern. Its stand-alone negative net worth at the end of September stood at 3,898 crore and its debt was 10,444 crore.

In fact, interest expenses accounted for three-fifths of September quarter’s operating profit, which is not pretty. Nevertheless, muted crude oil prices would offer much-needed support for the stock given that prices are not expected to increase in a hurry.

The writer does not own shares in the above-mentioned companies.

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