Mumbai: Jet Airways (India) Ltd, the country’s largest airline by passengers flown, posted a fifth straight quarterly loss amid high fuel prices, interest costs and a weakening rupee, unable to benefit strongly enough from rival Kingfisher Airlines Ltd cancelling most of its flights due to a cash crunch.
The airline industry will be forced to scale down capacity with even Jet Airways, which leads the market with a share of 26.8%, finding it difficult to make a profit amid the woes of others, as its planes had 78% seat occupancy in the March quarter. Jet Airways required a 91.3% seat occupancy to fly profitably.
“The loss is more than anticipated because interest costs rose unexpectedly. Our expectation was Rs 211 crore loss,” said Mahantesh Sabarad, an analyst at domestic brokerage Fortune Equity Brokers (India) Ltd.
Continuous losses at Jet have resulted in the substantial erosion of net worth, compelling the airline to explore options for raising money to meet various operational and financial obligations. The airline has total debt of Rs 13,000 crore.
Jet Airways has posted losses for a fifth quarter in arrow. Mint’s P.R. Sanjai looks that the factors hurting the airline’s earnings and what it’s trying to do about it.
Balance sheet reserves turned negative at the end of the year, Sabarad said. “Will the company raise fresh equity remains to be seen.”
For the last several years, Jet Airways was unsuccessfully trying to raise $800 million to reduce its debt and fuel expansion plan.
Jet Airways has already decided to cut money-losing routes, including long-haul flights to Johannesburg and short-haul flights to Dubai as part of a consolidation plan.
The Naresh Goyal-controlled airline posted a loss of Rs 298.1 crore for the quarter ended 31 March, wider than the loss of Rs 124.5 crore a year earlier.
Rupee depreciation and fuel prices impacted quarterly results, said Nikos Kardassis, chief executive officer at Jet Airways. The airline’s fuel costs shot up 42.4% to Rs 1,822.46 crore in the quarter.
Sales rose 24.6% to Rs 4,041.6 crore from Rs 3,243.5 crore. The carrier posted an operating profit of Rs 125.7 crore for the March quarter.
Local airlines added 12% more seats in the March quarter, while passenger numbers grew only by 7%, making it hard for them to raise fares. That’s even though Kingfisher Airlines has been cancelling over 50 flights a day to cope with a cash crunch and has trimmed its fleet to 16 planes from 66.
Shares of Jet Airways fell 0.23% to Rs 321.20 on BSE on Thursday. The benchmark Sensex rose 1.72%.
Kardassis said capacity reduction is helping Jet raise fares and improve yields. The full impact of this will be felt in the current quarter, said a senior Jet Airways executive, requesting anonymity.
Jet Airways is not alone in facing trouble on the earnings front. India’s airlines are expected to post a combined loss of $1.3-1.4 billion in the year to 31 March, a little more than half of last fiscal’s forecast, consulting firm Centre for Asia Pacific Aviation (Capa) said in its outlook report released on Tuesday.
In the Capa India mid-year outlook for 2011-12, released in June 2011, it had forecast a combined industry loss of $2.5 billion based on an exchange rate of Rs 45 to a dollar.
According to Tuesday’s Capa report, Jet Airways could place a large narrowbody order for more than 100 aircraft in 2012-13 to meet both replacement and growth requirements.
“Though crude price is getting stable, the rupee depreciation continues to be a cause of concern,” said the Jet official cited above.
In a statement, Jet Airways said the airline was taking several initiatives such as enhancing ancillary revenues, discontinuing loss-making routes, selling aircraft, and restructuring commissions being paid to agents.
Capa expects Jet Airways will be the biggest beneficiary of troubles at Kingfisher and Air India.
“Kingfisher’s dramatic contraction from 66 to 16 operational aircraft, of which half are regional ATR aircraft, has left the domestic business market open for Jet Airways. Similarly, the temporary industrial action on Air India’s long-haul international routes has driven North American and UK traffic to Jet Airways,” Capa said in a report.
Meanwhile, the wholly owned unit and low-fare arm of Jet Airways, JetLite (India) Ltd reported a loss of Rs 56.4 crore for the March quarter against a loss of Rs 75.7 crore a year earlier.
Other listed carriers Kingfisher Airlines and SpiceJet Ltd are yet to announce earnings.