Jet Airways Records Biggest Loss, Names New CEO

May 28--MUMBAI -- Jet Airways (India) Ltd posted its biggest quarterly loss in the three months ended 31 March, mainly because it has been offering discounts to passengers to fill planes.

The Naresh Goyal-promoted airline reported a loss of Rs.2,153.57 crore in the March quarter against a loss of Rs.495.53 crore a year ago. Sales rose 16.4% to Rs.4,566.17 crore from Rs.3,921.92 crore in the year-ago period.

Analysts polled by Bloomberg had expected Jet Airways to post a loss of Rs.150 crore for the March quarter on sales of Rs.4,863 crore.

Jet Airways' board named Cramer Ball as the chief executive officer (CEO) of the company. Ball has earlier this year completed a two-year term as the CEO of Air Seychelles, where he led a major restructuring programme that returned the airline to profitability in 2012 and 2013.

The airline also logged a seventh straight annual loss in 2013-14 as fuel prices and airport costs remained stubbornly high.

It reported a net loss of Rs3,667 crore for the fiscal year. The loss widened by more than seven times from Rs.485.5 crore a year ago. In other words, Jet Airways lost an average of Rs8.7 crore every day that it flew in the country with a domestic market share of around 22%.

Continuous losses at Jet Airways, in which Etihad Airways PJSC has bought a 24% stake, have resulted in the substantial erosion of net worth, compelling the country's largest airline by passengers flown to explore options for raising money to meet operational and financial obligations.

Indian airlines had a lean season during March quarter.

Jet Airways is not alone in reporting mounting losses. Rival SpiceJet Ltd posted a record loss of Rs.1,003.24 crore in 2013-14. The loss widened five times from Rs.191.07 crore a year ago. The Kalanithi Maran-owned SpiceJet lost an average of Rs.2.75 crore every day that it flew in the country with a domestic market share of nearly 20%.

In the March quarter, India's second largest budget airline SpiceJet's loss rose to Rs.322 crore from Rs.186 year ago.

The grounded Kingfisher Airlines Ltd has not reported earnings.

The Indian domestic passenger market expanded 4% in 2013, according to Directorate General of Civil Aviation.

There is still too much capacity and air fares are still falling, according to Bharat Mahadevan, a consultant who was regional manager for north-east Asia at Jet Airways.

"It has to be noted that this is in a year when there is no economic crisis (like in 2008) or where fuel prices have remained fairly stable and the dollar has remained fairly stable except for one or two months of volatility," Mahadevan said.

He said Jet Airways' loss indicates further losses and there is bound to be another round of consolidation or carriers exiting the market.

Competition is set to intensify as Tata Sons Ltd has forged two joint ventures with AirAsia Group Bhd (for a budget airline) and Singapore Airlines Ltd (for a full-service airline). While AirAsia India secured final approvals, the Tata-Singapore Airlines venture is awaiting it.

Mahadevan said two new airlines are coming into the market, and Tata-SIA seems to be the smarter one by cutting its losses in domestic by filing for a limited schedule, and waiting for the international skies to open up where it's more lucrative and much less price sensitive, especially in the long haul and the premium cabins.

Shares of Jet Airways dropped 3.53% to Rs.268.15 on BSE, while the benchmark Sensex lost 0.68% to 24,549.51 points. The earnings were announced after the end of trading on Tuesday.

Jet Airways' acting CEO Ravishankar Gopalakrishnan had resigned in April, becoming the fifth senior executive at the airline to quit since it sold a 24% stake to Etihad Airways PJSC last year.

Gopalakrishnan became the acting CEO of the airline on 16 January after Gary Kenneth Toomey quit, barely seven months after he took charge. Toomey had replaced Nikos Kardassis, who left the airline after serving his second term as CEO, from October 2009 to May 2013.

Copyright 2014 - Mint, New Delhi