Fuel cost spike lands Jet in red

Posts loss of Rs 124.5 crore in March quarter, standalone yearly profit was Rs 9.6 crore.

After posting profits for three successive quarters, India's largest airline by market share, Jet Airways, reported a net loss of Rs 124.5 crore for the 2010-11 fourth quarter. A 50 per cent increase in fuel costs led to a fall in margins and resulted in the loss.

On a year-to-year basis, the airline reported a small profit of Rs 9.6 crore on a standalone basis compared to a loss Rs 467 crore in 2009-10, but the results were a dampener as analysts expected the airline to post better figures.

Revenues were up 14 per cent at Rs 3,288 crore, while passenger figures grew 15 per cent. However, this was subdued by 51 per cent increase in fuel costs in the fourth quarter over the same period last year. In the backdrop of spiralling crude oil prices, Jet Airways spent Rs 1,279 crore on fuel which was Rs 443 crore higher than same period last year. As a consequence the airline's operating margins took a hit and halved to Rs 343 crore.

Jet Airways and its low cost arm JetLite command 25 per cent of market share in passenger traffic. JetLite's losses widened to Rs 166 crore from Rs 75 crore in the fourth quarter in 2009-10 and operating margins, too, declined. Its Ebitda (earnings before interest, taxes, depreciation, and amortisation) was Rs 26 crore as against Rs 119 crore for the same period last year. In its results analysis Jet Airways said that it carried out cost control measures and route rationalising exercise, which resulted in substantial cost saving.

"During the period, there was an unprecedented increase in prices of fuel which airlines were not able to pass on to the customer fully. Though airlines did increase fuel surcharges, the full impact will come only in the next quarter. As such, the operating performance for the quarter has been significantly impacted by such fuel price increases, '' the airline said.

Fuel costs were 39 per cent of total costs last quarter compared to 32 per cent of the total costs in 2010. Certain one time/exceptional items like service tax demands amounting to Rs 58 crore also impacted the results. Senior Vice-President M Shivakumar said the hardening of interest rates and fuel costs were cause of concern.

The airline has a total of Rs 3,500 crore working capital loan out of a total debt of Rs 13,000 crore. A rise in interest rates will increase the outgo. The airline expects that crude prices and higher fares could impact traffic growth in short term, though the medium term growth outlook remains intact.

Kapil Kaul of Centre for Asia Pacific Aviation said a combination of high fuel prices, lean season and negative pricing by Air India has affected revenues of Jet Airways and other airlines. He said Jet could have made profits for the full year and was on course to achieve it till December 31. "The result is on expected lines,'' he stated.

Jet Airway's stock closed at Rs 458.15 on Thursday which is 0.4 percent lower than previous close.