Jet seeking new investor; THY posts H1 profits

Eleanor Steed
By Eleanor Steed August 13, 2018 13:12

Jet seeking new investor; THY posts H1 profits

Jet Airways is reported to have begun a formal stake-sale process to raise $350-400 million from global private equity firms. Local media sources suggest that Blackstone, TPG, Cerberus Capital Management and Indigo Capital Partners have been targeted by the airline as possible investors but this has not been confirmed by any of the named parties. The beleaguered airline is also said to be seeking to monetise its frequent flyer programme it co-owns with Etihad Airways.

Jet Airways debts may be off putting for most investors, which totalled Rs 8,150 crore (approx. $1.16bn) on March 31, with losses continuing to mount. The airline has deferred the announcement of its quarterly results as its audit committee hadn’t presented them to the board.

Meanwhile, Turkish Airlines has posted strong results for the first six months of 2018.

Revenue rose by 30% to $6bn, while net operating profit rose to $258 million from $17 million last year, due to the increasing demand and unit revenues despite the increasing fuel prices.

In the first half of the year, EBITDAR (earnings before interest, taxes, depreciation, amortization and rent) rose by 38% to $1.28 billion, with a 21.5% margin. Passenger numbers rose by 18% to 35 million, with a 9% increase in available seat kilometres and a 16% increase in revenue per kilometres. Load factor rose by 4.3 percentage points to 80.4%.

THY has done well and the recent collapse of the Turkish Lira should assist the airline further in cutting costs of ground staff and other local fees significantly, but that will in no way make up for the additional costs incurred for all USD-denominated transactions for pilots, fuel, airports costs etc. On top of that the problem is compounded by aircraft purchase, loan repayments and leasing costs on top of parts and maintenance costs.

If the current level of the Turkish Lira is something that will last for longer than a fortnight then you can expect to see all/any airline profits for Turkish-based operations such as Pegasus and THY turn to a swath of red ink very quickly indeed. Moreover all interested parties should keep a very close watch indeed on what the Turkish president does next: will he go against a lifetime of rhetoric and raise interest rates? Will he compound the issue further by closing NATO bases and further moving towards the Russian sphere of influence?  The collapse of the Lira might make holidaying in Turkey far more attractive, and for Europeans this might well be the case, but we must not lose sight of the fact that the bulk of Turkish tourism still depends on Russians and the tightening of sanctions against Russia at the same time as tariffs and sanctions on Turkey is a very serious double blow for local airlines. We must also see what the ECB plans to say about all of this as so many already weakened European banks are exposed to the fortunes of Turkey.

Eleanor Steed
By Eleanor Steed August 13, 2018 13:12