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Jet Airways slips into loss on higher fuel prices, fare wars

Jet Airways slips into loss on higher fuel prices, fare wars
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First Published: Thu, May 19 2011. 11 38 PM IST
Updated: Thu, May 19 2011. 11 38 PM IST
New Delhi: Jet Airways (India) Ltd, together with low-fare unit JetLite, slipped into a loss after tax of Rs200.2 crore in the fourth quarter compared with a Rs 224.8 crore profit a year earlier, on the back of steep fuel prices that wiped out gains made by the country’s largest airline group in the preceding three quarters.
The figures, arrived at by adding numbers provided by the firm for the parent and its subsidiary, may well be indicative of how poorly India’s aviation industry has performed in the quarter ended March.
“We were expecting Jet to report better results among the airlines because they have substantial international operations, which have higher margins,” said Rashesh Shah, analyst at Mumbai-based brokerage firm ICICI Securities Ltd. “We expect Kingfisher’s fourth quarter loss at Rs 426 crore and SpiceJet at Rs 6 crore.”
Kingfisher Airlines Ltd and SpiceJet Ltd are the other two listed Indian carriers. They are expected to announce earnings in the next few weeks.
“It’s only fuel, nothing else. Fuel has been a major burner,” said Raj Sivakumar, vice-president (network planning, revenue management and distribution) at Jet Airways.
Fuel prices constitute 30-50% of an Indian carrier’s costs. The average fuel price in the fourth quarter rose to Rs 57 a litre from Rs 42 a litre in the year ago because of political turmoil in West Asia.
Sivakumar said Jet Airways paid Rs 343 crore more for fuel in the quarter than it did a year ago for the same level of operations.
Shah said the result was marginally below expectations on the revenue estimates, but better on profit after tax. “Overall, the loss is less compared to our estimate of Rs 313 crore,” he said.
Losses for the fiscal narrowed to Rs 85.84 crore from Rs 420.18 crore a year ago. Apart from fuel, stiff competition among domestic carriers also played a role in earnings at Jet Airways, which had been expected to make a full-year profit.
“Jet lost its pricing power when Air India was discounting air fares,” said Kapil Kaul, South Asia chief executive officer of consulting firm Centre for Asia Pacific Aviation. “What should have been profitable turned out to be a loss on account of these exceptional items.”
Revenue for the quarter rose 13% to Rs 3,660.9 crore from Rs 3,245.6 crore. Part of this gain was because of a depreciation reversal of Rs 68.3 crore for the quarter and also a mark-to-market gain on derivatives of Rs 44 crore, Shah said.
Growth in revenue also came from the 18% rise in international operations while the domestic business grew at half that pace, he said.
“Traffic (in the quarter) has gone up by 15% while yield is down by 1%,” Sivakumar said.
For the fiscal ended March, total revenue rose to Rs 14,522.58 crore.
The stock fell 0.4% to close at Rs 458.15 on the Bombay Stock Exchange. Earnings were announced during market hours. The benchmark Sensex rose 0.31% to end at 18,141.40 points.
Jet Airways said high crude oil prices could affect some traffic growth in the short term, though the medium-term growth outlook remains intact.
The carrier will add 10 aircraft to its fleet this fiscal with about four of these meant for replacing older planes, according to Sivakumar.
Jet Airways will continue expanding the international network, with Manila to be added as a destination shortly, as it gets back some of the aircraft that had been leased out.
“With the return of two Boeing 777 aircraft next quarter, we intend to upgrade some of our A330 services to Boeing 777 and the aircraft that get released will be used to start up Manila and other Gulf operations,” the carrier said.
Jet Airways together with subsidiary JetLite has a fleet strength of 116 aircraft.
They operate over 500 daily flights.
If oil persists at current levels, airlines will continue to sustain financial damage in the first quarter of the current fiscal as well, Kaul said.
tarun.s@livemint.com
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First Published: Thu, May 19 2011. 11 38 PM IST