Jet's scrip defies airlines' mounting ground problems

Last Updated: Tue, Apr 16, 2019 13:36 hrs
Jet Airways

Mumbai: From a fleet of 119 until last year to only 7 as of on Monday, Jet, once India's second-largest airline by market share, is almost on the brink of a shutdown. But the change in fortune for the airline has not dented investor confidence as the Jet counter continues to remain resilient.

Jet's scrip is down just by a little over 6 per cent since January 1 even though the airline's performance has nose-dived ever since it defaulted on its loan commitment in December.

For Jet, the developments are unlike how things panned out for an airline like Kingfisher during its turbulent times that ultimately led to its closure. Analysts say that this is largely owing to Jet's 30 per cent market share on international routes.

"The government is keen that they should keep this entity afloat by selling it to other airline partners. This is also important as Jet accounts for 30 per cent market share on international routes," Sandeep Raina, Associate Director, Edelweiss Professional Investor Research, told IANS.

"In the case of other airlines facing stress, the government reacted differently largely because of their lower share on international routes," he added.

Prior to the grounding which has depleted around 90 per cent of Jet's fleet size, the airline, with its large fleet, offered flights to 56 destinations in India and overseas.

Besides its international share, Jet has some valuable assets, said Deepak Jasani of HDFC Securities.

"It owns 16 planes which are worth $400 million. The Jet Privilege programme, the international routes, and landing and parking slots in key cities make the airline an attractive option for potential buyers or can be easily monetised by its lenders (under IBC)," he added.

However, the airline on Monday said it has extended the cancellation of all its international flights until April 18, which might spell trouble for it on the stock exchanges.

Inflating debt is another major concern for investors. Jet owes over Rs 8,000 crore to a consortium of lenders led by the state-run State Bank of India (SBI).

The possible scenario which may send the scrip plunging, say analysts, is if the bidders do not match up to the expectations of lenders or they lose interest after the initial Expression of Interest or the whole process gets entangled or delayed in the law courts.

"If a non-strategic investor (including the National Infrastructure Investment Fund) wins the bid or the company needs to be nationalised or taken over by the government (through Air India or any other route)... in all such cases, its stock price could plunge," said Jasani.

(Ravi Dutta Mishra can be contacted at ravidutta.m@ians.in)