BackJet Airways hopes to return to profit by 2017-18
Costs expected to stabilize, says Jet Airways CFO; recovery hinges on low fuel prices, say experts
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Jet Airways (India) Ltd expects to return to profit by 2017-18 on the back of cost reductions, expanding capacity without adding planes and more revenue from code-share partners, but an analyst warned that this was contingent on fuel prices continuing to stay low in this period.
“Costs are expected to stabilize at Jet Airways. There are several efforts that have been taken to stabilize the costs of selling and distribution, engineering and maintenance and pay-roll expenses," said Ravichandran Narayan, acting chief financial officer at Jet Airways, in a conference call.
News agency Press Trust of India reported that the airline has fired 50 overseas pilots in the 12 months to 31 March as part of its efforts to cut costs.
Jet Airways has a total debt of ₹ 11,902 crore on its books.
The airline reported a fourth-quarter loss (for the three months ended 31 March) as it took an impairment charge on an investment in its subsidiary JetLite (India) Ltd. The Mumbai-based airline reported that its loss narrowed to ₹ 1,728.99 crore for the quarter ended 31 March from ₹ 2,153.57 crore in the year-ago period.
Jet Airways, in which Etihad Airways PJSC has a 24% stake, was expected to post a net profit of ₹ 219.6 crore on net sales of ₹ 5,167.6 crore, according to a survey of analysts by Bloomberg. The airline took an impairment charge of ₹ 1,172.39 crore in the quarter on its investments in JetLite, up from ₹ 700 crore in the corresponding quarter last year.
Besides this impairment of goodwill, Jet Airways made provisions of ₹ 189.9 crore for a compounding fee on late payment of tax deducted at source, ₹ 84.5 crore for salary arrears, and ₹ 198.4 crore for maintenance charges. It made a foreign exchange loss of ₹ 39.2 crore.
As part of its efforts to grow revenue profitably, Jet is adding capacity without adding planes, said Raj Sivakumar, chief commercial officer at the airline. “We expect a 11% increase in domestic capacity and 17% increase in international capacity this year," Sivakumar said. The airline plans to increase asset utilization to create more capacity without adding planes.
The airline has always claimed it will become profitable by 2017-18.
“In the beginning of financial year 2014-15, Jet Airways outlined a three year turnaround plan to return to profitability. We are on track with the plan," Cramer Ball, chief executive officer, said.
A senior analyst with a domestic brokerage said Jet Airways’ approach should help drive profitable growth, but warned about fuel prices
“The grey area is fuel. The airline has no control on fuel costs," added this person who asked not to be identified.
On Monday, state-run fuel retailers in India raised jet fuel prices by a steep 7.5%. The price of jet fuel in Delhi was raised by ₹ 3,744.08 per kilolitre, or 7.54%, to ₹ 53,353.92.
Jet Airways on Monday launched a special four-day ticket sale offering discounts up to 30% on base fares for international travel. This is the second discount sale by Jet Airways in the last one week. The airline on Thursday put one million economy class seats up for sale at a flat 25% discount, for a limited period, on its domestic network as the airline heads into the lean season.
The latest offer is for international travel for both business and economy classes.
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