The rising rupee and stronger domestic operations helped shore up quarterly results at Jet Airways (India) Pvt. Ltd overcoming losses at its fledgling international operations as well as from its acquisition of Sahara Airlines Ltd.
Jet posted a quarterly net profit of Rs30.9 crore on revenue of Rs1,983 crore for the quarter ended 30 June, a turnaround from a loss of Rs44.9 crore in the year ago quarter.
It helped that the airline’s outstanding loans of more than $800 million (Rs3,240 crore) were revalued because of the depreciation of the dollar, leading to a one-time gain of $31 million, according to the company’s filings with the Bombay Stock Exchange.
Still, the results were unexpectedely pleasant for India’s largest airline by number of passengers.
Jet Airways has seen its market share in the profitable domestic operations chipped away by competitors such as Kingfisher Airlines Ltd and had to sell about three-fourths of its tickets at a discount because of pricing pressure, compared with an average of 70% throughout 2006.
But, at the same time, Jet saw its revenues-per-passenger increase by 6%, showing that the airline is able to command a premium for its tickets in the highly price-sensitive market. The airline flew 2.68 million passengers down from 2.81 million a year ago.
The Mumbai-based airline is also in the midst of an ambitious international expansion, adding flights to highly competitive, but lucrative, destinations such as Newark, outside New York, and Toronto.
That resulted in one-time expenses of Rs48 crore, including Rs32 crore on engine repair.
“What we have always said and maintained and keep reiterating, is that any new international route takes 12-18 months to settle down,” said Saroj Datta, the executive director of the airline in a phone interview. “So, even though some of the routes that are maturing have improved considerably, others are still depressing the results somewhat.”
Wolfgang Prock-Schauer, the CEO of the airline, said that international routes were doing better than expected, with its Mumbai-London flight and Singapore flight breaking even. “If you adjust for the one-time expenses, such as engine repair and the aircraft not being utilized, we have actually seen an improvement in the international operations, and the total loss is maybe $10 million,” he said.
In the March quarter, Jet lost almost $15.5 million on its international operations, flying fewer flights.
The airline has already taken delivery of a few of the 30 widebodied aircraft that it announced it would acquire for international expansion, which will eventually include Africa and other destinations in Asia.
Through 2008, that acquisition will cost about $2.5 billion, of which 85% is available as export credit, and the remainder will be financed mostly from a $400 million rights issue in mid-October, said K.G. Vishwanath, the airline’s general manager of finance. He said the airline will pay down that debt aggressively and will aim to have net debt-to-equity ratio at a little above 300%. This ratio cannot exceed four times to be eligible for export credit financing.
At the same time, Jet has had to spend an unspecified amount of money on completing its acquisition of Sahara, now called Jet Lite. As of now, 14 of Jet Lite’s 17 Boeing 737s, and four of seven smaller regional jets are back in service, after repairs and overhauls.
Separately, the rising rupee also helped the sagging fortunes at another, much smaller, airline Spicejet Ltd, which declared its first-ever net profit of Rs18.5 crore. This was helped by net foreign exchange gains of Rs20.5 crore and an additional one-time income of Rs12.7 crore earned by selling, and then leasing back, two of its Boeing 737s. In effect, the airline had an operating loss of about Rs10 crore, said Partha Sarathi Basu, the airline’s chief financial officer.