Route rationalisation, an improved performance of its subsidiary JetLite and the Air India and Kingfisher crises have helped Jet Airways steer out of loss after five quarters. The airline’s operating profit doubled to Rs 739 crore for the quarter ended June. The consolidated net profit of Rs 36 crore was largely aided by the income from sale and leaseback of aircraft.
The overall capacity growth in the domestic aviation sector stood at five per cent in the quarter. Since October, Kingfisher cut its capacity 68 per cent, which helped rivals boost profits. The spill-over traffic from Kingfisher and an increase in fares this summer helped Jet Airways boost yields. Jet Airways (domestic) yields rose 10 per cent, while JetLite (now rebranded as JetKonnect) yields rose about 50 per cent year-on-year in the quarter ended June.
“There was equilibrium between demand and supply, and this helped airlines charge higher and increase yields,” said an aviation expert.
“We trimmed the JetLite network, lowered the cost by reducing crew bases and increased yields substantially by branding it as JetKonnect and introducing the ‘Premiere’ (executive) class,” said a senior airline executive. The airline reconfigured JetLite’s Boeing 737 to add eight business class seats in each aircraft. JetLite yields improved rose, even as the total number of passengers and the number of JetLite departures declined in the quarter (year-on-year).
JetLite accounted for about a third of Jet’s net profit, though the results of Jet Airways (standalone) and JetLite are not entirely comparable, as JetLite does not have dollar-denominated debt and is not hit by fluctuations in the rupee’s exchange rate. Jet Airways’ profit was hit by foreign exchange losses of Rs 70 crore.
Cutting down on unprofitable international routes and redeploying the capacity on high-yield routes is also helping the airline. In May and June, the airline reduced/suspended flights to Sharjah, Riyadh, Colombo, Kuala Lumpur and Johannesburg, and added new flights on the Bangkok, Dubai and Kuwait routes. Jet’s international routes, which contribute 56 per cent to the revenue, saw high growth in loads and yields in the quarter.
Jet Airways chief executive Nikos Kardassis estimates withdrawing unprofitable routes would result in saving $20-25 million (Rs 110-137.5 crore) this year.
“Results of Jet Airways and SpiceJet are positive at the net level, largely due to sales/leaseback and revenue from other income. Things were better in the last three-six months, and the overall sentiment is beginning to look positive. However, we are not seeing signs of any sustainable recovery, owing to continuing high cost pressures. Some large airlines need to further rationalise their cost base,” said Kapil Kaul of the Centre for Asia-Pacific Aviation. He adds Jet’s results would have been different, had Air India pilots not gone a strike in May.
The Kingfisher crisis also helped, as passenger confidence in the UB Group airline was low. Jet, along with other airlines, was able to charge passengers more, owing to increase in demand and flight cancellations by the two rival airlines. “Other airlines have availed of the Kingfisher downsizing opportunity. We have seen sensible pricing dictated by commercial reasons, rather than driven competition for market share,” Kaul said.
Last year, Jet had complained the “irrational pricing” by Air India had forced it to cut its fares, too. This had affected the airline’s results. However, higher fares, coupled with the seasonality factor, boosted results in the quarter ended June.