Hong Kong: India’s top private carrier Jet Airways Ltd expects revenue from international flights to keep growing despite a darkening global economic outlook, and it warned Boeing Co. it will demand compensation if there are further delays to the revolutionary 787.
Jet, founded in 1993 and controlled by billionaire chairman Naresh Goyal, competes with rivals Kingfisher Airlines Ltd and Air India for a slice of booming India, where air passenger traffic almost doubled between 2004 and 2007 on the back of rising incomes and a surging economy.
Goyal, whose airline is fighting stiff competition, soaring jet fuel prices and a global shortage of pilots, waived a potential US recession and a likely downturn in global air travel and sky-high jet fuel costs on Monday.
Confident note: Jet Airways chairman Naresh Goyal says his goal for the airline is to turn profitable in 2009.
“In spite of subprime or whatever, India’s GDP (gross domestic product) has been growing at 8.5%. Of course it’s a serious situation. But in the US, there’s two and a half to three million Indians there. These people have been travelling,” Goyal, India’s 41st richest man according to Forbes, said in an interview.
Goyal was in Hong Kong to celebrate the launch of Jet Airway’s direct flight between Mumbai and Hong Kong. He expects the firm’s Mumbai-Shanghai route to be launched in June, with hopes of a Beijing route in the near future.
Goyal said Jet Airways would not join a growing line of carriers demanding redress for a further six-month delay—the third announced—in the Boeing Dreamliner, but warned he would, should Boeing push back the launch again.
Jet, which operates 104 aircraft on roughly 380 daily flights to nearly 60 destinations, has 10 Boeing 787 Dreamliners on order, due for delivery in 2011.
This month, Goyal said he would sell up to 10% of his 80% stake in the firm in a private placement to raise $400 million (around?Rs1,600?crore). He said on Monday that he would wait until markets calmed. “It’s the most terrible time.”
High operating costs and skyrocketing fuel prices will cause Indian carriers to lose $700 million in 2007-08, according to consultancy Ernst and Young.
Merrill Lynch projects Jet will book a fourth quarter loss of Rs71.6 crore this year versus Rs88.1 crore in profit last year.
“We are sharply lowering forecasts on a surge in fuel prices, despite raising assumptions on yields and seat factors,” the bank said in a research note last month.
Shares in Jet have plummeted more than 46% so far this year. Markets were closed in India on Monday.
Goyal, who claimed Jet would control 40% of India’s domestic market in two years—up from 35% now—declined to comment on fourth quarter estimates, but said his goal is for Jet to turn profitable in 2009. Merrill estimates a loss of Rs390 crore that year.
Around one-third of Jet’s business comes from international routes to the US, Europe, and the Persian Gulf, but Goyal is confident that will grow to 50% in two years.
Kingfisher, which is run by billionaire Vijay Mallya, is on track to launch direct, non-stop flights to the US this year, beating Jet to an important and highly coveted market.
Jet’s India-US flights are currently routed through Brussels. Goyal scoffed at the suggestion that his rival has a leg-up in the lucrative direct market. “I am interested in my balance sheet, in my profitability. They might say they’re our competition. I don’t consider them our competition, our competition is with the big boys.” Goyal has previously said that he aims for Jet to be one of the world’s top 5 airlines in terms of service within five years.
The firm, which last year bought budget carrier Air Sahara and renamed it JetLite, is trying to achieve the reputation for good food and top service enjoyed by Asian giants Singapore Airlines and Cathay Pacific.
The recent collapse of Hong Kong-based budget carrier Oasis Hong Kong Airlines came as no surprise to Goyal. “You cannot sell below cost,” he said, adding that irrational pricing schemes always cause trouble. “I’m not surprised they closed down. I expect more carriers to close down. But we are not going to do those crazy things that some carriers do.”