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Jet’s operating profit may herald upturn

Jet’s operating profit may herald upturn
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First Published: Tue, Oct 27 2009. 09 31 PM IST

Report card: Jet Airways’ Naresh Goyal. Jet earnings were hit by a pilots’ strike in September, which resulted in a revenue loss of around $16 mn. Ramesh Pathania / Mint
Report card: Jet Airways’ Naresh Goyal. Jet earnings were hit by a pilots’ strike in September, which resulted in a revenue loss of around $16 mn. Ramesh Pathania / Mint
Updated: Tue, Oct 27 2009. 09 31 PM IST
Mumbai: The country’s largest private airline with a 25.5% market share, Jet Airways (India) Ltd, swung to an operating profit from a year-ago operating loss as it cut capacity and costs in what’s traditionally the lean season while controlling losses due to a pilots’ strike.
Operating profit (earnings before interest, tax, depreciation and amortization, or Ebitda) was Rs44.24 crore for the quarter ended September compared with operating loss of Rs465.60 crore in the year-ago period, excluding Rs113.26 crore earned by selling planes and leasing them back.
Report card: Jet Airways’ Naresh Goyal. Jet earnings were hit by a pilots’ strike in September, which resulted in a revenue loss of around $16 mn. Ramesh Pathania / Mint
The second quarter of the fiscal year is typically the slack travel period for domestic airlines, reflected by Jet’s net loss in the three months widening to Rs406.69 crore from a loss of Rs384.53 crore a year earlier. Income from operations fell 34.41% to Rs2,020.11 crore from Rs3,080.37 crore.
Jet’s balance sheet indicates that the airline industry may be showing signs of recovery with capacity more or less stable and operating expenses declining. The airline made Rs304.91 crore through other operating income against Rs40.97 crore a year ago. This includes income from leasing of aircraft that brought Rs257.50 crore; the airline didn’t have any lease income last year.
Significantly, operating expenses—such as fuel, lease rentals, salaries, distribution— fell 34.34% to Rs2,280.78 crore from Rs3,473.63 crore, while sales dropped only 22.70% in reporting quarter against the year-ago period, deducting profit from sales and leaseback of Rs113.26 crore.
“Despite the pilots’ stir and the lean season, Jet Airways’ operating profit for the reporting quarter was at Rs245 crore against Rs190 crore in the corresponding quarter of last year,” said K.G. Vishwanath, vice-president (commercial strategy and investor relations) at Jet Airways. “This turnaround was possible because we had closed all loss-making international routes and pulled out some 20-25% capacity from the domestic sector, besides maintaining leaner aircraft structure.”
The operating profit measure Vishwanath referred to is Ebitdar (Earnings before interest, taxes, depreciation, amortization and rent), an approximate measure of operating cash flow in the case of an airline company.
Earnings were hit by the five days on which pilots stayed away (8-12 September), resulting in about 1,300 domestic and 200 international flights being cancelled. The revenue loss has been put at approximately $16 million for the period.
“No doubt there is a revival in the domestic airline industry with airlines carrying more passengers and key operating expenses coming down,” said Mahantesh Sabarad, senior analyst with domestic brokerage Centrum Broking Pvt. Ltd.
Still, shrinking yields are a concern for Jet.
“Surprisingly, the revenue per passenger kilometre has dropped by 20% on the domestic sector in the June to September quarter,” Sabarad said. “This, falling yields, is the root cause of Jet Airways’ widening losses. Its international operations, though, have improved with lesser losses.”
To counter the slowdown, Jet Airways moved two-thirds of its capacity to Jet Airways Konnect, its no-frills, single-configuration brand.
Domestic traffic in the second quarter grew 24% over the same period last year while Indian airlines added flights by just 5%.
The rise in passenger traffic, “along with the peak season impact in quarter 3, will help airlines to improve yields, which otherwise had been severely impacted due to the recession and lean season impact in Quarter 2”, Jet Airways said in a media statement on Tuesday. “Over the last few weeks, airlines have started raising fares and these increases have not shown any negative impact on traffic.”
The market wasn’t too enthused by the earnings. Jet Airways shares fell 9.05% on the Bombay Stock Exchange to close at Rs365.80 on Tuesday.
The carrier’s low-fare unit, JetLite (India) Ltd, posted a net loss of Rs126.1 crore against a net loss of Rs273 crore last year. Income from operations fell to Rs304.5 crore from Rs429.4 crore.
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First Published: Tue, Oct 27 2009. 09 31 PM IST