Jet Airways Reports Loss In December Quarter

Feb. 08--MUMBAI -- Jet Airways (India) Ltd reported a loss of Rs.267.89 crore for the three months ended December, considered a peak season for domestic airlines because of festivals and holidays falling in the period.

The airline warned of continuing weakness in the ongoing quarter that's typically a lean season.

This is the fourth straight quarterly loss for the country's second largest airline by passengers carried, reflecting fundamental problems that affect not just Jet Airways but also other Indian airlines -- high operating costs and irrational pricing.

The Naresh Goyal-promoted airline had a profit of Rs.85 crore in the quarter ended 31 December 2012.

The loss in the latest quarter came after the airline was buffeted by some of its bigger aircraft sitting on the ground, a steep fall in the value of the local currency and intense competition that led to pricing pressures.

The company, in which Etihad Airways PJSC has bought a 24% stake, posted a 7.85% increase in sales to Rs.4,535.87 crore from Rs.4,205.77 crore in the year-ago period.

A survey of analysts by Bloomberg had pegged the loss at Rs.240.8 crore on a net sales of Rs.4,788.9 crore.

In November, the Competition Commission of India (CCI) cleared the Rs.2,058 crore Jet-Etihad deal that involves Abu Dhabi-based Etihad Airways buying a stake in Jet Airways, the first such investment since the government allowed foreign airlines to invest in their Indian counterparts.

The cabinet cleared the deal on 4 October.

"It is bad to report losses on peak season. But for Jet Airways, the outlook is good as the balance sheet deleveraging will play out by repaying high cost debt through cheaper debt and equity infusion," said Mahantesh Sabarad, deputy head of research at SBICAP Securities Ltd.

Another airline consultant said Jet Airways had demonstrated an amazing turnaround from a Rs.890 crore loss in the preceding September quarter. "The airline is moving in the right direction and it will improve significantly in the next quarters because it is selling aircraft that was incurring loss of Rs.90 crore each quarter," he said, requesting anonymity.

But Jet Airways in a statement said the current quarter is expected to be muted in terms of both yields and seat occupancy because of the lean season ahead of the summer holidays. The rupee's depreciation continues to be a cause for concern, it said.

The airline said the rupee's depreciation, high fuel prices and an increase in airport charges affected costs in the reporting quarter.

Other expenses rose by 37% to Rs.1,359.61 crore and aircraft lease rentals increased Rs.38.45% to Rs.423.67 crore. The airline's fuel bill increased 13.40%.

In the December quarter, Jet Airways sold two wide-body Airbus A330 planes and the balance access capacity is expected to be sold or leased out in the current coming quarter.

Jet Airways required 85.3% seat occupancy in the reporting quarter to break even but could only fill 77.3% of its seats.

Its low fare subsidiary JetLite (India) Ltd reported a loss of Rs.16 crore for the December quarter against a Rs.8.1 crore profit a year ago. Ravishankar Gopalakrishnan, chief financial officer at Jet Airways, said that post the equity infusion by Etihad, Jet Airways had reduced its debt from Rs.12,494.70 crore as at September to Rs.10,895.20 crore in December. "This will help lower Jet's interest costs going forward," he said.

According to the International Air Transport Association (IATA), Indian domestic traffic rose 4% last year, compared with a 2.1% decline in 2012.

IATA, in a note on 6 February, said the Indian demand environment has been challenging because of the weakening economy, high inflation and slowing manufacturing and resource industries.

Loss-making airlines are having an adverse impact on the Indian banking system, too. On Friday, minister of state for finance Namo Narain Meena told Parliament that India's airlines owed Rs.26,360 crore to banks as on 31 December.

The minister said the total impaired credit of banks stood at Rs.3,474 crore.

Rival airline Kingfisher Airlines Ltd's operating licence was suspended in October by regulator Directorate General of Civil Aviation (DGCA) following a strike by the airline's employees. The licence has since expired, although it can be renewed within two years.

Kingfisher Airlines continues to be grounded, having accumulated losses of Rs.16,023.46 crore as on 31 March 2013. Its net worth as on that date was a negative Rs.12,919.82 crore. The airline owes Rs.7,000 crore to a clutch of banks including State Bank of India.

Kingfisher Airlines will announce its December earnings on 11 February, and low-fare airline SpiceJet Ltd will declare its financial results on 14 February.

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