Mumbai: Jet Airways (India) Ltd, the country’s largest carrier by passengers, swung to a profit in the second quarter from a loss in the year-ago period on improved seat occupancy and greater efficiency, underscoring the revival of the Indian aviation industry.

The airline, which has a market share of 26.9% along with its low-fare subsidiary, reported a stand-alone net profit of 12.40 crore for the quarter ended 30 September against a net loss of 406.69 crore in the same period last year.

This is first time Jet Airways has reported a net profit in the September quarter, traditionally a lean one for airlines. Total income rose 32% to 3,105.04 crore from 2,344.18 crore. Despite the lean season and competitive fares offered by rivals, the company has sharply improved its year-on-year operating profit margin, a reflection of improved network synergies, various cost efficiencies and consistently high levels of seat occupancies over the last few quarters, the airline said in a statement.

“This is not the story of Jet Airways, but the Indian airline industry. Jet Airways could post better results because of robust passenger growth and airlines managing to increase seat occupancies without adding more capacity into this market," said Rishikesha T. Krishnan, professor of corporate strategy at the Indian Institute of Management, Bangalore. “But I see lot of airlines are planning to add capacity with these kind of good results. The moment more capacity starts coming in, the old story is likely to repeat. The industry should maintain discipline in capacity induction."

Graphic: Ahmed Raza Khan/Mint

Analysts said Jet Airways’ results confirm the revival of Indian airline industry that reported a collective loss of $2 billion (Rs 8,900 crore today) in 2008 and 2009, in the backdrop of a credit crunch and economic slowdown in the wake of the collapse of US investment bank Lehman Brothers Holdings Inc.

Jet Airways, with its cash profits, will be able to service its debt comfortably without raising additional funds and could fetch a better premium, if it decides to approach the market. As of 30 September, Jet Airways had a debt of 1.37 trillion, marginally down 1.38 trillion as on 31 March.

In a separate presentation, Jet Airways said it has converted 1,200 crore of dollar loans, resulting in reducing its interest burden by $15 million per year. Jet Airways rose 1.24% to 810.45 a share while the Bombay Stock Exchange’s benchmark Sensex rose 0.46% to close at 20,032.34 points. Earnings beat Street estimates, analysts said.

“We were estimating a 20 crore net loss for the September quarter. The interesting fact is that the company has managed to increase its topline growth while it could maintain an operating profit margin of 22.1%," said Mahantesh Sabarad, senior vice-president (equity) at domestic brokerage Fortune Equity Brokers (India) Ltd. “Now Jet Airways will be able to service its debt as it has started to make cash profits."

The earnings also show that the Indian airline industry is poised to grow even bigger. Operating profit jumped to 470.79 crore from 63.40 crore. However, the carrier made a loss before tax and other income of 12.47 crore compared with the year-ago 409.01 crore loss. Other income of 35.60 crore was marginally down from 36.79 crore in the year ago. The airline reported other operating income of 135.14 crore from leasing aircraft against 257.50 crore for the year earlier.

JetLite, the low-fare arm of Jet Airways, reduced its net loss to 62.4 crore from a year-earlier loss of 126.1 crore. This was on revenue of 382.5 crore for the reporting quarter, up 25.61% from 304.5 crore.

In an outlook statement, the airline said the third quarter will see structural yield improvements in the domestic and international sectors as travel picks up. There could be some rough weather though.

“Unstable crude oil prices can play spoilsport in the airline growth story. Crude oil is already trading at $82 a barrel," cautions Sabarad of Fortune Equity Brokers.

Jet fuel, produced from crude oil, makes up 30-40% of the operating cost of the airline.