The Jet Airways (India) stock has been quite resilient through all the turbulence in the past few months. On Wednesday evening, the 25-year-old beleaguered private airline, informed that it would suspend its operations temporarily. When markets opened on Thursday, Jet shares were, of course, in free fall, shedding as much as 30%. It’s worth noting here, however, that Jet shares are still 8% higher than the 52-week low of ₹163 per share seen on 1 October. It does appear that Jet’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 has a market capitalisation of ₹2000 crore even after Thursday’s fall, and an outstanding debt of over ₹7000 crore. Considering that Jet 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 shares is surprising.
Also read: Money lessons for, and from, the jet job crash
History is not in their favour either. When Kingfisher Airlines Ltd (KFA) had temporarily suspended operations on 20 October 2012, the markets still gave it its shares a value of ₹900 crore. Eventually, KFA 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’s case, its shares have increased by 10% in the last six months until yesterday. While Jet may have possibly taken its last flight ever on Wednesday, investors’ hopes are still flying high.
And even if Jet were to revive, it’s 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 outlook on profitability was bright. A Bloomberg poll of analysts were expecting Jet to post a consolidated net loss of ₹460 crore for financial year 2020. This is after reporting a massive ₹2916 crore net loss for financial year 2019.
No salary for months, Jet Airways employees wonder where to go now
Meanwhile, other airlines are set to gain at the expense of Jet Airways. SpiceJet Lt and InterGlobe Aviation Ltd shares have already increased by 40% and 60%, respectively, so far this calendar year.
InterGlobe runs the IndiGo airlines, India’s largest 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’s shareholders, news flow on the bidding process will be crucial to watch out for hereon. Lenders have told Jet, the bid process will conclude on 10 May.
