Home / Companies / Company-results /  Jet Airways posts Rs221.70 crore net profit in Q1

Mumbai: Jet Airways (India) Ltd, the country’s second-largest airline by passengers carried, on Friday reported a net profit for the fiscal first quarter compared with a loss in the year-ago period, as it benefited from lower fuel prices, higher other income and a one-time gain from aircraft lessors.

The Naresh Goyal-promoted airline reported a profit of 221.70 crore in the three months ended 30 June, compared with a loss of 217.65 crore in the year-ago quarter. Net sales increased by 11.55% to 4,834.50 crore from 4,334.07 crore a year ago.

Jet Airways, in which Etihad Airways PJSC has a 24% stake, was expected to post a net loss of 53.70 crore on net sales of 5,252.30 crore, according to a survey of analysts by Bloomberg. Aviation consultancy firm Capa India was expecting Jet Airways to report a net profit of 260-390 crore on sales of 5,861.70 crore.

Fuel costs, which add up to 45-55% of an airline’s revenues, have fallen over the past year, allowing local airlines to improve profitability. Since fares have fallen less than operating costs, airlines have been able to reduce losses.

The difference between the average fare and the average break-even fare for a Mumbai-Delhi flight was at 1,221 in May 2014, according to a study done by Boeing Co. This difference reduced to just 395 by May 2015—a nearly 68% reduction in losses.

Fuel cost for Jet Airways fell by 20% to 144.69 crore compared with 1,804.77 crore.

The airline reported higher other income at 159.27 crore as against 55.02 crore for the quarter ended 30 June 2014. Other income was higher due to profit on sale and lease back of engines. The airline also reported an exception gain due to receivables from aircraft lessors of 127.95 crore as against 39.10 crore.

Jet Airways’ domestic capacity grew by 13.3% and passenger traffic increased by 25.4%, significantly exceeding industry growth.

“Our performance in the first quarter of this financial year demonstrates once again that the measures we are taking to bring the business back to profitability are having the desired result," Jet Airways founder chairman Naresh Goyal said, adding that all key performance indicators have shown progress.

At the beginning of 2014-15, chief executive officer Cramer Ball had outlined a three-year turnaround plan to get back to profitability. The plan included various stand-alone measures and synergies with Etihad Airways.

“Despite the increasingly competitive domestic landscape driven by aggressive new market entrants, our market share in India went up by 1.1 percentage points to 21.9%. This means that one in every five domestic passengers flew on Jet Airways," Ball said in a statement, adding that the airline continues to focus on leveraging the commercial and operational synergies of its partnership with Etihad Airways.

Etihad Airways and Jet Airways together operate more than 220 flights between India and Abu Dhabi each week.

In the first six months of 2015, Etihad Airways transferred more than 235,000 passengers on Jet Airways’ network in India through its code-share partnership, with Jet Airways providing 182,000 passengers to the Etihad Airways network.

Domestic growth has shown significant improvement as passenger traffic across the industry has risen 34%, Capa India chief executive officer (South Asia) Kapil Kaul said.

“The first quarter performance suggests beginning of turnaround—though domestic business continues to be challenging and under stress even with a significant reduction in jet fuel costs and high growth rates but international story is getting robust and will be key to overall turnaround efforts," Kaul said.

Kaul expects Etihad Airways to make further capital commitments to Jet this year and adds that recapitalization is critical to a sustainable turnaround for Jet Airways.

Shares of Jet Airways rose 7.94% to 400.20 apiece on BSE, while the Sensex gained 1.88%, or 517.78 points, to close at 28,067.31.

Another analyst was not impressed by the quarterly results. “It’s really a nothing performance. The only thing which the airline has influenced and is showing in the numbers is the code-share traffic," said K.G. Vishwanath, partner at Trinity Aviation Consultants Pte Ltd Singapore, a consultancy. “All of the other improvements in revenues and costs are all market driven, be it fuel or traffic growth in the market."

The numbers are looking good largely due to exceptionals ( 128 crore) and profit on sale and lease back of engines ( 30 crore), he said. However, Vishwanath, who worked in Jet Airways till 2013, said the airline management is prudent enough to explore new ideas to overcome this without being too dependent on external factors like crude oil prices or demand growth.

Even though Jet Airways has carried 26.1% more passengers at 5.65 million for the reporting quarter, the average fare per passenger fell by 10.6% to 7,854.

Jet Airways’ unit Jet Lite (India) Ltd posted a net profit of 4.7 crore for the fiscal first quarter against 40.4 crore in the corresponding quarter of the previous fiscal year. This was on a sales of 322.5 crore for the reporting quarter against 357.4 crore for the quarter ended 30 June 2014.

In contrast to its parent, JetLite has carried 9.2% lower passengers at 0.64 million for the first quarter of the current fiscal year but average fare went up 2% to 4703.

Jet Airways’ rival SpiceJet Ltd had reported a second consecutive profitable quarter during April-June period as India’s second largest low-fare airline managed to increase seat occupancy. SpiceJet reported a net profit of 71.84 crore for the first quarter ended 30 June compared with a loss of 124.10 crore in the year-ago period.

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