Jet Airways shares jump as fuel prices drop

New Delhi: Jet Airways India, Etihad Airways’ partner, paced a rally in Indian airline stocks after the region’s costliest fuel prices were cut to the lowest in five years.
Jet Airways, controlled by Naresh Goyal, climbed 10.8 per cent, making it the best performing share on the Bloomberg Intelligence Global Airlines Valuation Peers Index in the past month. The stock is poised for its highest close since December 2010. InterGlobe Aviation, the owner of IndiGo , advanced as much as 13 per cent, while SpiceJet rose 14.2 per cent.
India’s carriers have lost $10 billion in the past seven years as they offered base fares as low as Re1 (2 cents) in a nation where provincial taxes make jet fuel prices the most expensive in Asia. The nation’s oil retailers cut fuel prices, which make up as much as 60 per cent of an Indian airlines’ cost, by 10 per cent in New Delhi on Friday as Brent, the benchmark for half of the world’s crude trading, plunged.
“A sharp reduction in fuel prices remains a key trigger for margin expansion going forward,” Rashesh Shah and Devang Bhatt, analysts at ICICI Securities wrote in a note on December 24. “Given improving macro factors like healthy industry passenger traffic growth coupled with lowest ATF (aviation turbine fuel) prices, we expect” Jet to report healthy revenue growth along with better margins.
Jet Airways reported a second straight quarter of profit in the three months ended September 30. Net income rose 25 per cent to Rs875.9 million.
Fastest growing
India was the world’s fastest growing aviation market in 2015, expanding more than 20 per cent, according to International Air Transport Association. In comparison, passenger traffic in China grew at about 10 per cent, while growth in the Unites States was less than 5 percent, Iata said in a December presentation.
That’s lured Singapore Airlines and AirAsia to start Indian units in recent years. Indian airlines will need 1,740 new planes valued at $240 billion over the next 20 years, according to Boeing.
Almost 36 million Chinese traveled overseas in the third quarter, 12 percent more than a year earlier, according to the Chinese Outbound Tourism Research Institute, which forecasts 135 million outbound Chinese tourists for the full year.
IGATE Research, in a report cited on the Financial Express website, predicted India would have almost 30 million outbound tourists by 2018. India and China are among the fastest-growing markets for Airbus and Boeing, which forecast that Asia will overtake the United States as the world’s biggest plane market in two decades.