Jet Airways stock soars 47% as it’s all set to fly, but fuel costs, new players indicate turbulence ahead

• Jet Airways is set to make a comeback into the aviation industry around July-September quarter with a new promoter, funding and even competitors.
• The airline was grounded in April 2019 after it went into bankruptcy and is now owned by -- UK-based Kalrock Capital Partners and UAE-based businessman Murari Lal Jalan.
• Shares of Jet Airways have surged 47% in the last one month on excitement to fly again while Indian and global markets have been reeling under inflation concerns.

Three years after it was grounded, Jet Airways is all set to fly again in July-September with a new promoter in tow. Unlike Kingfisher which closed down for good, Jet Airways is able to make a comeback after going bankrupt.

It received an Air Operator Certificate (AOC) from the aviation regulator DGCA this month. Its new owners – UK-based Kalrock Capital Partners and UAE-based businessman Murari Lal Jalan, took over the airline in June 2021.

As expected, the shares of Jet Airways surged 47% in a month, even as the broader markets have been reeling under the stress of growing inflation and rising interest rates.

Jet will make a comeback into the sky after three years
Jet however will fly into an aviation market that’s starkly different from how it left it. Far from the numero uno status it once occupied, Jet will be a newcomer with many promising newcomers like Vistara, a much stronger Air India which is acquired by Tata Sons.

Jet will also have to fight off established players like IndiGo and SpiceJet which have taken over a substantial chunk of the market. Then there is a flurry of new players like True Air, Star Air and Alliance Air which will be where Jet will be landing in its initial months.

Unlike most new airlines, Jet will not be able to gain an entry with price cuts since the sector itself is in recovery mode after being badly hit by the Covid-19 pandemic.

“Let’s say from Delhi to Bomday if they offer a ₹3,000 to ₹4,000 fare they will get market share but then they will never make money because they will later on increase prices. In an already price sensitive market segment, such measures will not help. Also, you are going to make it more difficult for the entire industry to come back to full recovery,” said Amrit Pandurangi, an aviation expert.

Even the airlines which are performing well are hit by the rising cost of fuel. Aviation turbine fuel has doubled in the last one year, and since its costs account for 40% of operating costs - their margins are already under stress.

Price points, hence, will not be the fighting turf this time around - once a popular strategy. “Anybody losing price to gain market share will end up making a lot more losses. And oil prices are not going to come back to low levels in the next year or so at least,” added Pandurangi.

Indian aviation industry is about to get more crowded
Though Jet Airways has new funding, management and promoters it is going to be tougher to gain market share in the industry with a rising number of new airlines.

Newer participants will also stress out a sector where airline traffic growth is slightly below pre-covid levels at around 10.5 million in April 2022 as compared to around 11 million in April 2019 - which was when lockdowns were at their peak. Apart from Tatas, marquee investor Rakesh Jhunjhunwala’s budget airlines Akasa Air is also likely to debut the market in June - taking the wind off Jet’s second coming.

In all it will be a tough ride for Jet Airways, and even with its pared debt, it will have to play it slow and safe to ensure a soft landing into a market where its brand still holds value.


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