Jet Airways Management expects to break even in FY11. The company expects the supply/demand situation to stay tight in FY11 and overall load factor to improve 4%. It expects yield to improve by 10-15% in Q1FY11. International operations have stabilised, with most routes breaking even. The company has guided for a 27% EBITDA margin, ~6% higher than our assumption.
Overcapacity risk is low: The risk of taking the fleet on operating lease and thus increasing capacity is low.
Jet Airways has rationalised its fixed-cost base, namely in manpower and maintenance. Next, the company is looking to cut its interest cost by lowering high-cost debt through selling a plot of land in Mumbai, a sale and leaseback of its fleet, and raising funds by equity dilution up to USD400m.
Finally HSBC expect industry discipline to surprise positively, and Jet Airways’ yield should improve from here on - OVERWEIGHT with a Target Price of Rs 580
Courtesy: Excerpts from HSBC - Jet Mgt Meet hosted just Minutes Ago
