Mumbai: Jet Airways shares have been quite resilient through all the crisis over the past few months. On Wednesday evening, the 25-year-old beleaguered private airline informed stock exchanges that it would suspend operations temporarily. When markets opened on Thursday, Jet Airways’ shares were, of course, in free fall. The stock touched a 52-week low during trading and eventually closed the day 32% down. Still, it does appear that the company’s shareholders think this isn’t really the final call to deboard.
“Investors think there is still value to be found and people are pinning their hopes on the outcome of the bidding process for the airline," said an analyst requesting anonymity.
Jet Airways has a market capitalization of ₹1,862 crore even after Thursday’s fall, and an outstanding debt of more than ₹7,000 crore, as on 31 December. Considering that the airline has shut operations, it seems unlikely any buyer will cut a deal that has positive implications for existing shareholders. In light of this, the resilience in Jet Airways’ shares is surprising.
History is not in their favour either. When Kingfisher Airlines Ltd had temporarily suspended operations on 20 October 2012, the markets still gave its shares a value of ₹900 crore. Eventually, the shares turned out to be worthless. However, even in that case, note that the KFA stock had tanked about 40% six months prior to the temporary suspension.
In Jet Airways’ case, its shares have increased by 10% in the last six months until Wednesday. While the airline may have possibly taken its last flight ever on Wednesday, investors’ hopes are still flying high.
And even if Jet Airways were to revive, its capacity is not expected to bounce back quickly. Edelweiss Securities Ltd analysts wrote in a report on 8 April, “We assume that Jet Airways will eventually lose 50 planes to lessors, which would swerve its fleet size down to 73 in financial year 2021."
Further, it’s not as if the outlook on profitability was bright. A Bloomberg poll of analysts was expecting Jet Airways to post a consolidated net loss of ₹460 crore for FY20. This is after reporting a massive ₹2,916 crore net loss for FY19.
Meanwhile, other airlines are set to gain at the expense of Jet Airways. SpiceJet Ltd and InterGlobe Aviation Ltd shares have already risen by 53% and 33%, respectively, so far this year. InterGlobe runs IndiGo, India’s largest airline by market share.
According to Kotak Institutional Equities, “Disruption of Jet Airways’ capacity can lead to temporary demand-supply mismatch, particularly going into peak summer demand."
Needless to say, for Jet Airways’ shareholders, news flow on the stake sale process will be crucial to watch out for hereon. Lenders have told the airline the bidding process will conclude on 10 May.