Home / Companies / News /  Crisis brings Jet Airways shares down 85% from 2005 issue price

Mumbai: Shares of Jet Airways (India) Ltd posted their steepest-ever fall on Thursday, a day after the carrier announced a halt in operations. The stock fell 34% intraday and closed 32.2% lower at 163.90 as investors exited the counter on worries whether the airline would be able to resume its business. In comparison, the benchmark BSE Sensex declined 0.34%.

With the latest stock performance, shares of the company once ranked as India’s largest airline outside government control, have crashed 85% from its initial share sale price of 1,100. Jet Airways listed on the stock exchanges on 14 March 2005. On 26 April 2005, it touched an all-time high in intraday of 1,379 a share and has since then dropped 88.1%.

In the past year, Jet Airways has lost 73.89%, while rivals SpiceJet Ltd and InterGlobe Aviation Ltd, which runs IndiGo, gained 0.5% and 5.16%, respectively.

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Since January, shares of Jet Airways have tanked 53.4%, while SpiceJet surged 40% and InterGlobe rose 8.5% on investor expectations that the two carriers would be among the biggest beneficiaries of the Jet Airways crisis.

Troubles at Jet Airways have led analysts to revise their stock ratings.

Two of the analysts covering the stock have a “buy" rating, one has a “hold", while four have a “sell" rating, shows Bloomberg data. In March 2018, there were four “buy" ratings, two each for “hold" and “sell" for Jet Airways shares.

Edelweiss Securities downgraded Jet Airways to reduce from hold on 8 April and also cut its target price. “While varying possibilities are emerging, including the hunt for a new buyer and/or a debt write-off, Jet Airways’ viability has taken a hit. Yet, the stock price remains firm. We continue to assume a swerve back to profit during FY21 and a fair EV/EBITDAR of 7 times," said Jal Irani and Vijayant Gupta, analysts at Edelweiss.

Jet Airways flew its last flight on Wednesday night—9W 2502 from Amritsar to Mumbai—after lenders led by the State Bank of India declined to hand out emergency funds.

“As no emergency funding from the lenders or any other source is forthcoming, the airline will not be able to pay for fuel or other critical services to keep the operations going. Consequently, with immediate effect, Jet Airways is compelled to cancel all its international and domestic flights," the company informed BSE.

Jet Airways said it would await the bid finalization process by the lenders that is expected to bring in fresh equity by the end of May.

Kotak Institutional Equities Research said the disruption of Jet Airways’ capacity can lead to a temporary demand-supply mismatch, especially in the current peak summer travel season.

“Jet had a 15% domestic capacity share pre-disruption, though its share of higher-yield metro routes was higher, indicating an added potential boost to yields. This yield benefit may, however, be lower and sustain for a shorter duration of time compared to FY2013 (when Kingfisher Airlines shut operations) as all airlines including IndiGo, SpiceJet, GoAir, Vistara and AirAsia India are looking to increase capacities," it said in a report on Thursday.

However, India Ratings and Research Pvt. Ltd said globally an individual airline’s bankruptcy has limited impact on traffic performance. It added that in the US, nearly every major domestic carrier has filed for bankruptcy at some point in the past.

In Ind-Ra’s view, these could lead to only short-term disruptions, given that large airports have large catchment areas and other operating airlines can absorb traffic to an extent.

“A similar episode of Kingfisher Airlines highlights the ability of other airlines to adapt to the difficult times and enlarge the market share," it said.

Slots of Jet Airways at airports that have been cancelled are being awarded to other airlines on a temporary basis. The market share lost by Jet Airways has to an extent been a gain for other airlines such as IndiGo and Vistara.

“Given the vacation season, troubles in the airline space are likely to keep the ticket prices high and thereby dent the propensity to fly. With increased airport pairing, underpinned by the regional connectivity scheme, traffic volumes soared in FY18 and FY19," the agency said. Air traffic also increased in 11 months of FY19 by 12.94% year-on-year, but the agency expects a decline in the first half of FY20.

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