Following the surprise profits reported by two of the three listed airlines, Jet Airways and SpiceJet, Bank of America-Merrill Lynch (BofA-ML) on Monday said it showed the industry was on a revival path and would return to profitability next financial year.
The American investment bank also upgraded the stocks of both these companies to “buy” from “underperform”, saying improving industry trends such as signs of ticket price rises and reduced capacity would improve profitability. “These carriers will substantially lower their losses in FY13 and return to profit in FY14,” Bank of America-Merrill Lynch said in a report.
“We upgrade both Jet and Spicejet to buy (from underperform). Our upgrade is led by the improved pricing power led by slower than anticipated increase in supply, a sharp jump in Ebitdar due to industry yields rising by around 15 per cent this year, and rationalisation of routes. This should see these carriers substantially lower their losses in FY13 and return to profit in FY14,” BofA report said.