INDIA BUSINESS WORLD - OCTOBER 2006
THE MONTH THAT WAS...

JET AIRWAYS LOSS WIDENS IN Q2 TO RS 55.1 CR

 AIRLINE industry market leader Jet Airways has been hit yet again by falling yields and lower load factors. The company has posted a loss of Rs 55.1 crore for the quarter ended September, against a loss of Rs 45 crore in the previous quarter and a net profit of Rs 68.6 crore in the same quarter last year.

   Jet's losses would have been higher but for the profit of Rs 161.7 crore on sale & lease back of aircraft. Without this money, it would have recorded a pretax loss of Rs 234 crore instead of Rs 72.5 crore during the quarter's results.

   The company is trying to bring down cost overheads, renegotiate contracts and improve asset utilization for a financial turnaround. ‘The outlook remains challenging even as we enter the traditionally stronger second half of the year', Jet said in a release.

   Jet carries out sale & lease back transactions on 4 to 5 year old depreciated aircraft where the market value is more than the book value. Last year, the company had carried out a similar transaction on five aircraft and recorded a profit of Rs 270.6 crore on the same. The cushion of sale & lease back may not be available for the other quarters.

   Jet's total income was up 37.5% to Rs 1,821.2 crore for the July-September quarter. The reason for the losses seems to be the 40% industry-wide capacity addition over the past year. Large capacity additions have resulted in lower yields for the airlines. Jet has lost pricing power resulting in lower margins. The number of tickets sold on discounted fares is close to 65% now against 35% or so earlier. The load factor is down from 71.2% last year to 63.5% for the July-September quarter. The second quarter is also traditionally the lean season for air travel.

   On the brighter side, the company has been able to improve aircraft utilization. The number of available seat kilometres (ASKMs) was up 40% over the last year whereas the number of aircraft has gone up from 50 to 57. International operations accounted for 17% of sales during the quarter against 12% last year. The Jet Airways stock closed at Rs 616.5 on Tuesday, down 1.82%.