Home >Companies >Company-results >Jet Airways posts Rs1,729 crore loss on impairment charges

Mumbai: Jet Airways (India) Ltd, the country’s second largest airline by passengers carried, reported a fiscal fourth-quarter loss as it took an impairment charge on an investment in its subsidiary JetLite.

The Mumbai-based airline reported a net loss of 1,728.99 crore for the quarter ended 31 March, compared with a net loss of 2,153.57 crore in the year-ago period.

Sales rose 10.91% to 5,064.52 crore in the quarter from 4,566.17 crore in the year-ago period.

Jet Airways, in which Etihad Airways PJSC has a 24% stake, had been expected to post a net profit of 219.60 crore on net sales of 5,167.60 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 has 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 had a foreign exchange loss of 39.2 crore.

“All in all, Jet Airways seems to have chosen the March quarter to write off several expenses. If one excludes all these one-off items, the results are quite good on operations terms. The business model is still strong," said Mahantesh Sabarad, deputy head of research at SBICAP Securities Ltd.

Sabarad said Jet Airways has adopted conservative and prudent accounting practices to do away with the hangover of impairments.

JetLite reported a net loss of 74.3 crore for the March quarter against a net loss of 312.60 crore a year ago. Sales slipped 9.2% to 367 crore.

Jet Airways’ results continue to highlight structural challenges faced by the airline, said Kapil Kaul, chief executive officer (South Asia) at consulting firm Capa Centre for Aviation.

“Even though restructuring is on track and focus is on cost reduction and revenue quality, the enormity of the loss (even without good will impairment) in the fourth quarter means pace of progress is not significant. Further and significant recapitalization in the financial year 2016, as Capa expected, is critical to restructuring objectives," Kaul said.

Indian airlines have accumulated losses of around $10 billion and are burdened by $16-17 billion of debt, according to Capa. In a report released in February, Capa said cash constraints for most airlines are leading to fare discounting to raise cash.

Jet Airways 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.

Jet Airways claimed a 60% improvement in operating performance for the financial year 2014-15, just one year into its three-year turnaround plan.

“FY15 was an encouraging year when we set out to change the fundamentals of this business, allowing us to deliver a significant improvement in our net result. This demonstrates unequivocally that the three-year turnaround plan we put in place last year is on track," chairman Naresh Goyal said.

He said the improvement in performance was largely attributable to the implementation of a single brand and full service strategy across domestic operations.

“We have made significant progress on all key fronts of the business, and achieved substantial growth in all of our major key performance indicators in a turbulent and competitive business environment," chief executive officer Cramer Ball said.

Jet Airways and Etihad Airways together operate over 4,300 international flights a month, connecting India to the world via the Abu Dhabi gateway.

Ball said although significant progress had been made in the last financial year, there was still a great deal of work to be done to complete the turnaround plan and bring the airline back to sustainable profitability.

“There is still much to be done, but with the continued support of our management, our employees and our shareholders, I am confident Jet Airways can achieve the objectives we laid out in our plan," Ball said.

Shares of Jet Airways closed at 385.40 on the BSE, up 0.42% from their previous close; the benchmark Sensex rose 1.2% to close at 27,828.44 points.

Jet Airways’ rival SpiceJet Ltd, India’s second-largest low-fare airline, swung to a profit in the fourth quarter, beating analysts’ estimates after six straight quarters of losses. SpiceJet’s management termed it a transformational quarter, marking the beginning of a turnaround, but experts noted that the earnings were buoyed by several one-off items.

SpiceJet reported a net profit of 22.5 crore for the quarter ended March compared with a loss of 321.5 crore in the year-ago period. Lower fuel costs, benefits of renegotiated contracts and settlements and a net gain on an insurance claim helped the company post a profit.

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