Jet Airways (India) jumps on rating upgrade, falling oil price

Jet Airways (India) rose 8.87% to Rs 350.60 at 10:54 IST on BSE, following drop in crude oil prices and ICRA upgrading the rating on the company's Rs 3210 crore loan facility.

Meanwhile, the BSE Sensex was up 56.38 points, or 0.20%, to 28,750.37.

On BSE, so far 10.07 lakh shares were traded in the counter, compared with an average volume of 2.74 lakh shares in the past one quarter.

The stock hit a high of Rs 354 so far during the day, which is also a 52-week high for the counter. The stock hit a low of Rs 333.05 so far during the day. The stock hit a 52-week low of Rs 203.50 on 26 September 2014.

The stock had outperformed the market over the past one month till 28 November 2014, soaring 39.23% compared with 6.75% rise in the Sensex. The scrip had also outperformed the market in past one quarter, spurting 44.81% as against Sensex's 7.72% rise.

The mid-cap company has an equity capital of Rs 113.60 crore. Face value per share is Rs 10.

Ratings agency ICRA has upgraded the long-term rating assigned to the Rs 3210 crore, fund-based bank facilities of Jet Airways to [ICRA]BB from [ICRA]C, a statement issued by Jet Airways (India) said. The announcement was made after market hours on Friday, 28 November 2014.

ICRA has reaffirmed the short-term rating of [lCRA]A4 (pronounced ICRA A four) assigned to the Rs 4250 crore, short-term, fund-based/non-fund based bank facilities of Jet Airways. ICRA has taken a consolidated view of Jet Airways, along with its wholly-owned subsidiary, Jet Lite (India) (Jet Lite).

The rating upgrade takes into account the improvement in the liquidity and credit profile of the company, arising from improved operating performance as well as support from its strategic partner-Etihad Airways PJSC, it said.

The ratings reflect the strategic initiatives being planned by Jet Airways together with its strategic partner in reshaping its business so as to enable it to return to sustainable profitability and improve cash flows. This strategic alliance between the two airlines is expected to be mutually beneficial across all areas, including network growth, code sharing, operational synergies and cost improvement through maintenance contract renegotiations, co-ordination of flights, leasing of spare aircraft, procurement of fuel and other services etc. resulting in cost savings for both the airlines, it added.

Meanwhile, shares of aviation companies rose after jet fuel prices were reduced by over 4% from midnight of 30 November 2014 and 1 December 2014.

Brent crude oil futures touched a fresh four-year low, extending a steep sell-off after Organization of Petroleum Exporting Countries (OPEC) decided not to cut production last week Brent for January settlement fell $1.68 to $68.47 a barrel. Brent for January settlement dropped $2.43 a barrel to settle at $70.15 on Friday, 28 November 2014, the lowest close since 25 May 2010, after OPEC on Thursday, 27 November 2014 decided to keep the cartel's production levels unchanged at a meeting in Vienna.

Fuel costs account for a chunk of airline expenses and falling oil price is likely to provide relief.

Jet Airways (India) reported a net profit of Rs 70 crore in Q2 September 2014 compared with net loss of Rs 891 crore in Q2 September 2013. Revenue rose 16% to Rs 4772 crore in Q2 September 2014 over Q2 September 2013.

Jet Airways currently operates a fleet of 115 aircraft, which include 10 Boeing 777-300 ER aircraft, 8 Airbus A330-200 aircraft, 4 Airbus A330-300 aircraft, 75 next generations Boeing 737-700/800/900/900ER aircraft and 15 ATR 72-500 and 3 ATR72-600. With an average fleet age of 5.92 years, the airline has one of the youngest fleet of aircraft in the world. The company flys to 75 destinations, spanning the length and breadth of India and beyond.

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