Jet Airways ends in red on weak rupee, high costs

Posts Rs 348-cr consolidated loss in June quarter

Higher operating costs and lower-than-anticipated yield led to Jet Airways posting a net consolidated loss of Rs 348 crore for the first quarter ended June against a Rs 35-crore profit in the year-ago period.

The loss is higher than Street estimates of a loss of Rs 200-250 crore. The airline said a significant depreciation of the rupee, which crossed the psychologically important 60-mark against the dollar during the quarter, along with steep increases in airport charges at key metros, high fuel prices and a slowing economy that prevented it from raising fares led to higher-than-expected  losses. The overall impact of these factors was $56.5 million (Rs 339 crore).

JetKonnect (JetLite), which had lower operating expenses than Jet Airways, posted a profit of Rs 6.9 crore against Rs 11 crore in the year-ago period, while Jet Airways made a standalone loss of Rs 355 crore. Jet Airways’ standalone revenue fell 12 per cent to Rs 4,064 crore as the airline carried fewer passengers and withdrew from international routes. Yield grew only 4.7 per cent despite April-June being a good season for leisure travel.

An airline source said the air travel market had not grown as expected, leading to discounted fares that meant a modest yield growth.

Domestic operations, which contribute 43 per cent of revenue, accounted for Rs 263 crore of pre-tax loss on a stand alone basis while international operations lost Rs 92 crore. Over the next few months the airline is expecting 10-12  per cent growth in international operations,  while domestic capacity is expected to rise six to eight per cent.  The biggest spike was seen in aircraft lease costs at 31 per cent over the year-ago period.

Vice-president (investor relations) K G Vishwanath said: “About 45 per cent of our costs are in dollars and there was about four to five per cent increase in dollar-related expenses such as leases and maintenance.”

The airline hopes to secure cheap dollar loans under the external commercial borrowing route to reduce the cost of its debt. which amounts to $300 million at 12-14 per cent a year now.

While Etihad Airways is expected to assist in securing a $ 150-million loan, the airline hopes to tie up with other financial institutions for the balance.

Jet Airways (India) Ltd posted a Rs 348-crore loss in the quarter ended June against a Rs 35-crore profit in the year-ago period, has impacted the results.

However, higher yields and continued cost control measures helped the Jet group post an operating profit of Rs 529 crore. The result includes an amount of Rs 131 crore foreign exchange translation loss. The cancellation of certain long haul flights in the second and third quarters of FY2013 meant that there were instances of aircraft on ground during the quarter. The impact of this was Rs 121 crore.

Hameed Ali, acting chief executive of Jet, said, “The domestic aviation industry continues to go through a turbulent time due to a weak economic scenario, resulting in sluggish demand growth. This, coupled with airlines’ inability to pass on high input costs fully to passengers, has caused financial strain on airlines. We expect the demand scenario to improve in the second half of the fiscal.”

The proposed equity infusion by Etihad Airways will significantly change the landscape of the business not only in terms of deleveraging the balance sheet but also reduction in costs due to better bargaining ability higher revenues due to improved connectivity and network reach, Ali said.