Home >market >mark-to-market >Jet Airways hones international edge

Jet Airways (India) Ltd wants to add more flights to international destinations as these have proved more profitable than its domestic routes. Last week, the airline said it plans to add more flights in its overseas network. That is likely to see its international business, which contributes more than half its revenue, grow further in the coming quarters. On a consolidated basis, revenue from the international business contributed 53% of total revenue in the last fiscal year. This rose to 56% in the June quarter.

Meanwhile, crude oil prices are down and can offer significant relief to the sector, as fuel costs account for a large portion of operating costs. In fact, in the June quarter, fuel costs as a percentage of total operating costs for Jet Airways were as high as 39%, on a stand-alone basis. But in the September quarter, aviation firms may not get to enjoy the benefits of falling crude oil prices, since it is anyway a seasonally weak one. And then, analysts expect the impact of low fares being offered by airlines to offset, to some extent, the gains from the decrease in crude oil prices.

Not surprisingly, Jet Airways’ shares mirror these concerns. In the current fiscal year till now, the shares have declined by 15% in comparison with a 21% increase in the S&P BSE 200 index. Increasing competitive intensity in the sector and a debt of 9,810 crore as of 30 June could very well mean that a reversal in its stock price performance is difficult, at least from a near-term perspective. Better passenger traffic, lower crude oil prices and an improvement in its financial performance are some factors that investors should watch out for.

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