Name: Abhishek Chordia

Student No. M00474597

Airline Industry
Jet Airways
Jet Airways is an Indian based airline and the second largest airline industry in
Indian after IndiGo airlines both in market share and passengers carried. Jet
airways network involve of 76 destinations which is functioned by 3000 flights
with its domestic centre in Mumbai and the international centre at the Brussels.
The founder and the chairman Mr Naresh Goyal started the company 1992 with
its first flight in 1993 and soon became the fastest growing airline in the world.
The jet airways group include of jet lite as its subsidiary company. The
company also leases the aircrafts.
The chamber of jet airways consist of several director and officers and powers
lies in them.
Directors and officers
Aman Mehta

Director

Anita Goyal

Executive Vice President

Arun Kanakal

Co. Secretary & Compl. Officer

Arun Kanakal

Secretary

G Ravishankar

Chief Financial Officer

Gaurang Shetty

Director & Manager

Hameed Ali

Chief Operating Officer

I M Kadri

Director

James Hogan

Additional Director

James Rigney

Additional Director

Javed Akhtar

Director

Naresh Goyal

CEO

Naresh Goyal

Chairman

Sudheer Raghavan

Chief Commercial Officer

The fleet of jet airways consist of 114 aircraft with an average life of 5.4 years.
The information of which in the below table.
Airbus A330-200
Airbus A330-300
ATR 72-500
ATR 72-600
Boeing 737-700
Boeing 737-800
Boeing 737-900
Boeing 737 MAX 8
Boeing 777-300ER
Boeing 787-9
Total

10
4
15
2
11
56
6
10
114

With 114 aircraft in operation there 77 aircraft still to join the fleet by 2015.

Risk Profile Analysis

Jet airways an Indian based airline industry with its hub in Mumbai and one of
the major airline industry in India hires over 13,163 people and is being
merchandised on the national stock exchange of India (NSE). Being a major
airline jet airways falls under the large cap category. The company has an
enormous market capitalisation of 25.36 billion. Jet airways acquired Sahara
airline in 2007 and recently Etihad airways acquired 24% of stake in jet
airways.

As we compare the income of the jet airways of the last five years that is from
2009 to 2013
Income is the most important thing while evaluating a firm. Income are
generated by rendering the services or by sales. By seeing the income of the jet
airways it can be seen that the firm is generating more income year by year
which is a positive sign for company. As we compare the income of 2013 to
2012 an 11.68% of gain can be noticed which says the company is healthy and
earning income.
Jet airways however reported a loss of 779.80 cr for the financial year 2013.
This loss is result of the diminishing value of the rupee and rising price of crude
oils and airport charges for which the company has to borrow more and more to
overcome these charges.

The above chart shows the market share of the jet airways in the year 2013 in
the aviation industry in India. The jet airways group has a total market share of
23.8% which is the highest market share in the airline industry.
The company has not paid any dividend since 2008. According to the directors
report the dividend has not been paid because of the financial health of the
company. As the company is incurring heavy losses.
Jet airways shows an increase in the passenger revenue of 14% as compared to
the fiscal year of 2012. The passenger revenue for the year 2013 was Rs
1,436,867 lakhs.

Risk Return Analysis

Risk Adjusted Performance

0.227

Market Risk Adjusted Performance

0.8609

Mean Deviation

3.07

Semi Deviation

1.99

Coefficient of Variation

349.42

Standard Deviation

4.35

Variance

18.89

Information Ratio

0.2657

Jensen Alpha

1.12

Total Risk Alpha

0.7855

Skewness

1.36

Kurtosis

3.32

R-square

0.537

Adjusted R-Square

0.529

Total Beta

1.20

Risk free rate

2.4

As we look at result of the regression analysis the portfolio return is very low as
matched to the risk related with it. The beta is also very instable because of the
stock price of the jet airways are not stable.
If we look at the Jensen Alpha which is greater than 1 shows that the return of
the jet airways is expected to be above than the average market return with the
risk involved in the market. The Jensen Alpha is 1.12 which is a positive value
which indicates that the jet airways share will earn an excess return.
As we look at the result of the regression analysis the R- square comes out to
54% which suggest that the 54% of the risk is coming out from the market
factor where as 46% of risk is associated with the firm itself. In the risk scenario
there are two types of risk systematic risk and unsystematic risk.
Systematic risk are generally the risk associated with the external factors of the
firm and are generally uncontrollable. The firms can only take measure to avoid
these risk. Some of the systematic risk associated with jet airways are
The price risk allied with the stock is high.
The hike in prices of fuel and the fixed cost imposed by the airport
authority with the rise of the air traffic.
Unsystematic risk are those risk which are associated with the organisation itself
and its effects the organisation itself. The Unsystematic risk prevails in the
organisation itself the organisation should recognize these type of risk and
should take measure to avoid them. Some of the Unsystematic risk associated
with the jet airways are
Liquidity risk

 Credit risk
The relative valuation is not judicious because jet airways has not paid any
dividend since 2008. Since the stock valuation is not possible because of the
result would be zero because P/E ratio= dividend paid/EPS, so the result is not
reasonable.
Return on equity is the measure of the profitability of a firm. ROE measures
that how much profit a firm is generated by the amount invested by the
shareholder. The ROE for the jet airways is 164.43% which is a disappointing
figure. Generally a company with a high leverage gets a higher ROE. The
higher ROE suggest that company has high liability and lower profit.
The sales turnover of the jet airways for the year 2013 was 16,852 which was
10.69% percent higher than the previous year which was 15,224.68. The
companys average growth rate is 13.48% and is estimating a 15% higher sales
in FY14. On the basis of this the rating is 5 out of 10.
The EPS of the jet airways is very unsatisfactory the company is getting poorer
and is not able to generate the shareholder value. The EPS ratio for the current
financial year came to -56.24. The rate on the risk scale would be 10 that is
most potential danger.
As we look at the current ratio of the jet airways which comes out to be 0.36 for
the current financial year. A current ratio less than 1 suggest that the company is
unable to pay its short term borrowing when they become due. The current ratio
of the jet airways suggest that the company is unable pay its short term
obligations which suggest high risk rating of 8.
A company with a high leveraged finance is said to be affected 1st during the
economic depression. A debt to equity ratio greater than the 1 is said to highly
risky. In the case of the jet airways the debt to equity ratio is 2.89 times which
the highest potential risk is for a company. It suggest that the company is
continuously borrowing which hinders its growth and rises the burden of the
interest upon the company.
Levered Beta
Unlevered Beta
Debt Equity Ratio
Expected Return

1.7023
0.1435
2.89 times
11.72%

Jet airways is having a high levered beta than the unlevered beta because the
company has huge borrowing and the fixed cost of the company is increasing as
result of the increase in the interest payments due to borrowing.

Financial Structure of the Jet Airways

The airline industry is one of the most risky business in todays modern times.
The airline industry is becoming more competitive day by day because of the
entrant of the new competitors day by day. The new competitors enter into the
market and offer low price to the costumers to attract them. The price war in the
market affects the profitability of the organisation. The bankruptcy rate of the
airline industry are highest among any industry. Apart from high competition
the airline industry have a more of fixed cost than the variable cost. Such a
financial structure in accounting is called high operating leverage. The cost of
flying a half-filled passenger plane and fully filled passenger plane is same for
an airline industry. In a highly business risk market the company sees to have a
low financial leverage. This means a low amount of debt.

Jet airways capital structure is consist of debt and equity. The equity capital
stands less than the debt. The company relies more on the debt and long term
borrowings. This is the reason the company is moving towards the high
financial leverage. The increase in the fuel prices and increase in the lease rental
of the aircraft have forced the jet airways to increase the short term borrowing
and decrease in the profit. Till current date jet airways have a huge liability of
12,000 coroes which is the highest among the private carriers in India. In order
to overcome these loss jet increased there prices by 30%.
An optimal financial structure for an airline industry is a low debt financial
structure. The best financial structure in the airline industry is of southwest
airlines which has the lowest debt. If the company has financial structure which
have both equity and debt than the optimal point should where both are equal or
equity is more than the debt.

Conclusion
As we look at the aviation industry of India it looks promising as the passenger
are growing in the domestic as well as the international route. The Indian
aviation industry is having an intense competition in the market because of the
new entrants in the aviation industry. Jet airways is the one of the largest airline
in India with the highest percentage of the market share but the revenues and the
profitability of the company does not boost because the company has not paid
any dividend for last 5 years even the stock of the jet airways has been
undervalued which has a high level of risk.
The Indian aviation industry has not been unfavourable to the companys
because of the diminishing value of the rupee and increase in the taxes and
guidelines set by the government in India. Jet airways seems to be more
promising with it new deal with the Etihad airways and promises for a new
growth in the future. With new regulations laid by the Indian govt. allowing
more and more FDI in the domestic airlines the airlines are hoped to make
profits in the coming future in India.

Appendix

The data on which the regression analysis has been done. The analysis has been
done on basis of the index of the NSE and stock price of the jet airways. The
data is on the basis of past five years.
Jet Airways
Adj
Closin
g NSE
Index

Date

Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09

16839.
63
18197.
2
18845.
87
18503.
28
19135.
96
19445.
22

Adj
Closi
ng
Price
(Rs.)
375.8
5

7.46%

446.3

3.44%

Retur
ns of
Jet
Airwa
ys
15.79
%
6.95%

1.85%

7.17%

3.31%
1.59%

6.40%

9.10%

7.63%

479.6
5
447.5
5
478.1
5
447.1
5

Retur
ns of
NSE
Sens
ex

2.55%
0.18%
11.67
%

25.29
%
27.10
%
5.09%
0.82%
0.55%
13.39
%

718.7

0.58%

5.87%

678.8
5

0.95%

27.99
%

530.4

4.46%

3.93%

510.3
5
537.8
5
480.0
5
403.1

3.50%

5.11%
12.04
%
19.09
%
21.79

Jun-09

17823.
4

415.4
5

2.75%

Jul-09

18327.
76

556.1

10.64
%

762.8
5

5.06%

Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10

20509.
09
19521.
25
20032.
34
20069.
12
17971.
12
17868.
29
17700.
9
16944.
63
17558.
71
17527.
77
16429.
55

6.93%

803.8
810.4
5
814.9

0.18%
6.68%
0.44%

Jul-10
Aug-10
Sep-10

16357.
96
17464.
81
16926.
22
15896.
28
17126.
84
15666.
64
15670.
31

515.4
553.1
5
452.3
5

6.34%
3.18%
6.48%

379.3

7.18%

329.2
5

9.32%

263.1

0.02%

257.2
5

8.12%

14493.
84

225.5

0.90%

14625.
25
11403.
25

302.6
5
193.9
5

28.26
%
17.46
%

May-11

9708.5

169.9

9.19%

Jun-11

8891.6
1

141.5
5

5.65%

Jul-11

9424.2
4

178.8

2.31%

Aug-11

9647.3
1

202.5
5

6.10%

Sep-11

9092.7
2

129.4
5

7.10%

Oct-11

9788.0
6

156.4

Nov-11

12860.
43

400.4
5

Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11

Dec-11
Jan-12
Feb-12
Mar-12
Apr-12

14564.
53
14355.
75
13461.
6
16415.
57
17287.
31

%
6.82%
22.28
%
19.26
%
15.20
%
25.14
%
2.27%

23.89
%
11.70
%

14.08
%
25.49
%
56.05
%
14.16
%
20.03
%
20.83
%
11.73
%
56.47
%
17.23
%
60.94
%
15.23
%

472.4

1.45%

1.37%

466

6.64%

8.26%

17.99
%
5.04%
10.50
%

19.95
%
2.76%
0.61%

430.4
5
537.7
552.9
5

May-12

15644.
44

556.3
5

Jun-12

17578.
72

737.3
5

Jul-12

17648.
71

755.2
5

Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13

20286.
99
19363.
19
19837.
99
17291.
1
15318.
6

11.00
%
0.40%
13.00
%

997.2

4.77%

830.7
5
876.2
5
907.3
5

2.39%
14.73
%
12.88
%
1.49%

803.3

15550.
99

721.9
4

14650.
51
14544.
46
13872.
37
13072.
1

809.8
6
764.3
1
713.6
4
628.1
1

12938.
09

592.2
9

14090.
92
13786.
91
13696.
31
12961.
9
12454.
42

756.7
1
611.3
7
669.4
8

6.15%

24.55
%
2.37%
24.26
%
20.04
%
5.19%
3.43%
12.95
%
11.27
%
10.86
%

0.73%

5.96%

4.84%

7.10%

6.12%

13.62
%

1.04%

6.05%

8.18%
2.21%
0.66%
5.67%

591.1

4.07%

643.4

6.46%

21.73
%
23.77
%
8.68%
13.26
%
8.13%
20.73
%

REFRENCES
JETAIRWAYS.BO Key Statistics | JET AIRWAYS Stock - Yahoo! UK
& Ireland Finance. 2014. JETAIRWAYS.BO Key Statistics | JET
AIRWAYS Stock - Yahoo! UK & Ireland Finance. [ONLINE] Available
at:https://uk.finance.yahoo.com/q/ks?s=JETAIRWAYS.BO
Jet Airways (India) Ltd, JETAIRWAYS:NSI summary - FT.com.
2014. Jet Airways (India) Ltd, JETAIRWAYS:NSI summary - FT.com.
[ONLINE] Available
at: http://markets.ft.com/research/Markets/Tearsheets/Summary?
s=JETAIRWAYS:NSI.
Jet Airways (India) Ltd. Stock Price, Charts, Details and Latest
Announcements : Rediff.com. 2014. Jet Airways (India) Ltd. Stock
Price, Charts, Details and Latest Announcements : Rediff.com.
[ONLINE] Available at: http://money.rediff.com/companies/JetAirways-India-Ltd/16600015.
Anuual Report 2013
Available at:
http://www.jetairways.com/doc/InvestorRelations/AnnualReport201213.pdf