Jet Airways' troubles could be blessing in disguise for SpiceJet

Shareholders of Jet Airways have lost over 37 per cent in the last two trading sessions, and close to 75 per cent from the year-ago levels. 

The stock is expected to post further losses, given the suspension of operations and the time it will take to bring a new owner on board. Analysts believe that the odds are stacked against potential suitors, given the leverage and little clarity on the quantum of haircut. Most brokerages have a sell rating on the stock and advise investors against bottom fishing in the scrip. 

An analyst at a domestic brokerage believes it will be easier for competitors to acquire planes, empty slots and bilaterals, and offer the services, rather than get into legacy problems. 

In addition to negotiating with vendors, reworking contracts and clearing current dues, there is complexity, be it in tackling long-term debt, integrating the planes into their network, or mapping the routes that have to fit into their scheme of things, says the analyst. 

Given the problems at Jet that will take time to sort out, the key beneficiaries will be the sector and players such as SpiceJet. 

For the sector, with 15 per cent of capacity both in domestic and international routes getting curtailed, there will be sustained improvement in pricing over the next couple of quarters. After that, it will be a function of how much capacity comes into the system and the cost structure at that point, believe analysts. 

While there has been a re-rating of listed stocks such as InterGlobe Aviation (IndiGo) and SpiceJet, analysts believe there are still some gains for SpiceJet. 

While the IndiGo stock hit its lifetime high in trading on Thursday, analysts Santosh Hiredesai and Chalasani Teja believe that SpiceJet is best placed to capitalise on the situation due to its fleet structure; it is the only other Boeing operator in the market for narrow body aircraft, which is the mainstay for the domestic/short haul international network. 

Given the issues with other airlines as far as pilots are concerned and the predominantly Airbus-based network, if SpiceJet gets it execution right, it could be in pole position to grab the slots, bilaterals, aircraft and trained manpower, says an analyst.

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