MOSL: JET AIRWAYS (Not Rated)-Focus on profitability-Multiple cost rationalization initiatives, differentiated offerings

Jet Airways: Focus on profitability; Multiple cost rationalization initiatives, differentiated offerings

(JETIN IN, Mkt Cap USD1.4b, CMP INR754, Not Rated)

We recently met Jet Airway's CEO, Mr Vinay Dube and CFO, Mr Amit Agarwal. Our key takeaways from the meeting:

 Focus on profitability over market share

• JETIN's focus remains more on profitability and debt repayment than on market share gains. The company intends to use its free cash flows mainly to repay debt. It has pared its debt from ~INR11b at the end of March 2015 to ~INR65b at the end of September 2017.
• JETIN expects to increase its ASK by 8-10% over the next 3-4 years. It has placed on order for 75 units of B737-Max with Boeing and the delivery is expected to start from June 2018. It expects to add 25 aircrafts by March 2020. All the new aircrafts would be funded through sale and lease back model and the management expects lower rentals post the recent sovereign upgrade.
• During FY15-18, JETIN added capacity equivalent to almost one aircraft per month by improving aircraft utilization. It has increased its block hours from 11.4 hours to 13.33 hours, resulting in ~10% ASK CAGR since March 2014 without significant aircraft addition. It has increased utilization by operating aircrafts in the domestic market during the day and in the international market in the night.