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Business News/ Companies / Jet swings to profit in June quarter
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Jet swings to profit in June quarter

Jet swings to profit in June quarter

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Mumbai:Jet Airways (India) Ltd, the country’s largest airline by passengers carried, posted a 24.7 crore profit for the quarter ended 30 June against a loss of 123.16 crore in the year-earlier period, performing better than expected as it ended a run of five loss-making quarters.

Jet and some of its rivals have benefited as carriers such as Kingfisher Airlines Ltd and state-owned Air India Ltd have had to cut flights because of financial difficulties and industrial action.

That has allowed the rest of the industry to raise fares amid slowing economic growth, high jet fuel prices and the weakening of the rupee against the dollar. The June quarter is traditionally the best season for airlines. India’s second largest low-fare carrier, SpiceJet Ltd, also posted a profit to end five loss-making quarters when it announced earnings on 30 July.

While Jet’s earnings exceeded expectations, sustaining the performance may be difficult, said Mahantesh Sabarad, senior vice-president (equity research) at domestic brokerage firm Fortune Equity Brokers (India) Ltd. Challenges include high user charges at Delhi’s Terminal 3 and finding the room to increase fares further.

In its outlook statement, Jet said high crude prices, the rupee depreciation and a slowdown in the economy will impact operating margin in the short term.

“The domestic traffic trends in the second quarter will reflect seasonality in seat factors though yields continue to be strong," the airline said.

Jet displayed strong operational efficiency and increased cash flows to service debt, said Sharan Lillaney, an analyst at domestic brokerage firm Angel Broking Ltd.

The carrier said it intends to strengthen its balance sheet further by bringing the debt burden down by around $400 million ( 2,245 crore today) during the fiscal year through various initiatives. Jet had a total debt of 10,494 crore as on 30 June.

Carriers are having to cope with fuel costs and a weakening rupee, Jet chief executive Nikos Kardassis said in the earnings release. “Fuel cost increase and depreciation of the Indian rupee weighed heavily on the industry’s profitability," he said.

Aviation turbine fuel prices in the June quarter were 13% higher than in the first quarter of fiscal 2012 and 3% higher than in the fourth quarter, he said. Jet said its fuel costs shot up 25.81% to 1,967.4 crore in the June quarter.

Crude oil prices have come off the highs of $120 per barrel and now range at $100-105 per barrel, the airline said. But this has been offset by the rupee dropping from 44.70 in the first quarter of fiscal 2012 to 55.615 in the June quarter this year, a slump of around 24.4%, putting pressure on Jet’s dollar-denominated costs, the statement said.

“Despite having a natural hedge because of our US dollar-denominated earnings, we had to recognize forex losses to the extent of 170.3 crore for the quarter on account of such exchange-rate fluctuation,’’ the statement added.

Jet’s earnings, fuelled by the sale and leaseback of aircraft and engines, were lifted by other income to the tune of 124 crore. Kardassis said the company completed the sale and leaseback of two aircraft and two engines in the June quarter.

“During the second quarter, we intend to complete transactions for another eight-nine narrow body aircraft. This will help in reducing on-balance-sheet debt and release cash," he said.

Angel Broking’s Lillaney said such practices were well within accepted norms. “Jet Airways had other income of 124 crore, but it was nullified by a foreign exchange loss of 70 crore. Therefore, these numbers are reflecting strong operational efficiency," he said.

JetLite (India) Ltd, the company’s wholly-owned low-fare unit, also returned to profitability. It posted a net profit of 11.7 crore against a net loss of 5.2 crore a year ago.

Jet Airways rose 0.69% to 374.05 on Friday on BSE. The benchmark Sensex was little changed at 17,197.93 points.

SpiceJet posted a profit of 56.15 crore for the quarter ended June, compared with a loss of 71.96 crore a year earlier, largely riding on other income from the sale and leaseback of its planes.

pr.sanjai@livemint.com

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Published: 04 Aug 2012, 12:04 AM IST
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