Jet loss zooms 6 times on higher costs; sales flat

Rs 998-cr consolidated loss in second quarter higher than that in full FY13

Jet Airways on Wednesday reported its biggest-ever quarterly net loss, hurt by factors like higher fuel prices, a sluggish market, increased expenses, and a weak rupee. At Rs 998 crore, its consolidated loss in July-September 2013, a third straight quarter of loss for the airline, was six times higher than Rs 165 crore in the corresponding period last year and 28 per cent more than Rs 778 crore in full 2012-13.

The dismal financial numbers of Jet were in stark contrast with those of rival IndiGo, which had reported Rs 787-crore profit for 2012-13.

On a standalone basis, Jet Airways posted Rs 891-crore loss, while subsidiary JetKonnect (JetLite) lost another Rs 107 crore. Even as costs for the airline grew 17.8 per cent on account of the twin impact of the rupee’s depreciation and rising fuel costs, low fares in the July-September quarter, usually a weak period for travel, led to subdued sales growth of one per cent.

Centre for Asia Pacific Aviation (Capa) had estimated the airline to post a loss of about Rs 930 crore. Its CEO for South Asia, Kapil Kaul, on Wednesday said Jet’s result was on expected lines. “Airlines continue to face the dual challenge of hostile cost environment and soft yields,” Capa said in its report. While fares of full-service airlines like Jet were 10 per cent higher than those of low-cost ones, their unit costs were 50 per cent more, it said.

Capa added Spicejet, which had posted a Rs 50-crore profit in the first quarter of this financial year, was expected to report loss of Rs 430 crore to Rs 490 crore in the second. It pegged the combined loss of domestic airlines in the second quarter at about Rs 3,000 crore.

In August, Jet had put 700,000 of its tickets up for sale at 15-20 per cent discount in a seven-day window. This represented about 10 per cent of its domestic capacity. While the move stimulated demand and other airlines jumped on to the discount bandwagon, the result was a 11 per cent drop in yields.

On a year-on-year basis, fuel rates increased around eight per cent during the quarter. Part of this was passed on to flyers in the form of hike in fuel surcharge but the full impact would be seen in the current quarter, the airline said. What added to the carrier’s woes was a Rs 123-crore loss on account of grounding of some of its aircraft.

The company’s revenue from domestic operations, which account for about 40 per cent of the total, fell 1.1 per cent, or Rs 632 crore, on a standalone basis, even as costs grew 23 per cent.

“The Indian aviation industry faced increasing cost challenges, mainly due to the rupee’s weakness against the dollar, high fuel prices and increase in airport charges in certain stations putting pressure on the bottom lines,” Jet Airways CEO Gary Toomey said in a statement.

The airline said the third-quarter results would reflect high seasonality, which will help improve yields. Domestic fare revision, made at the fag end of the second quarter, would start showing positive effect in the rest of the year. The forward booking trends for the quarter are quite encouraging. In the coming peak season, more business-class seats will be on offer,” the airline said. It also said the surplus aircraft would be leased or sold in the coming months and investment from Abu Dhabi-based Etihad would help in repayment of high-cost debt.

ICICI Securities analyst Rashesh Shah expects Jet’s margins to improve in the third quarter due to seasonality impact and with the rupee strengthening against the dollar.
ROUGH WEATHER
Key September quarter numbers for Jet Airways

Rs 998 crore: Consolidated loss
Rs 4,607 crore: Revenue (up 1%)
Rs 5,637 crore: Expenses (up 17.8%)
19.2 per cent: Rise in unit costs (standalone)
98.2 per cent: Break-even seat factor (up 20.1 percentage points; standalone)
12 per cent: Fall in average gross revenue per passenger (standalone)