JetLite, Pas­sen­ger Growth a Drag on Jet

High ca­pac­ity, strong dol­lar also hurt com­pany

The Economic Times - - Markets + Finance - Do­mes­tic Y-o-Y % In­ter­na­tional Y-o-Y %


Jet Air­ways recorded its high­est loss in any quar­ter due to its pro­vi­sion for diminu­tion/ im­pair­ment in the value of its in­vest­ment in sub­sidiary JetLite, low pas­sen­ger growth, high ca­pac­ity, and a firm dol­lar in re­la­tion to the ru­pee in the March quar­ter. Ac­cord­ing to the com­pany’s state­ment, it had an eq­uity in­vest­ment of .` 1,645 crore in its sub­sidiary JetLite. Be­sides, the com­pany had given it an in­ter­est-free loan of .` 1,963 crore. Since JetLite had been mak­ing losses and has neg­a­tive net worth, the com­pany, through an in­de­pen­dent val­u­a­tion, booked .` 700 crore as diminu­tion/im­pair­ment of value of its in­vest­ment, which mas­sively in­creased its losses to .` 2,153 crore in the March quar­ter against a loss of .` 495 crore in the same quar­ter last year.

In the March quar­ter, avi­a­tion tur­bine fuel prices, on an aver­age, grew by 10.5% to .` 79,899 per kilo­litre. Due to this, fuel ex­penses rose 15.2% to .` 1,906 crore on a year-onyear ba­sis. With the staff of Eti­had Air­ways com­ing on board af­ter it ac­quired 24% stake in Jet Air­ways, the aver­age head­count rose 8% to 13,081, push­ing up em­ployee ex­penses by 37% to Rs 529 crore from the year ear­lier. Also, a weak ru­pee didn’t help. In the March quar­ter, the ru­pee de­pre­ci­ated 14% against the dol­lar. Since most air­lines com­pa­nies pay lease rentals, main­te­nance cost and pi­lot salaries in dol­lars, to­tal ex­pen­di­ture in­creased 10% to .` 5,431 crore. Ac­cord­ing to the Direc­torate Gen­eral of Civil Avi­a­tion (DGCA) web­site, in the first two months of the March quar­ter, de­mand and ca­pac­ity of the air­line in­dus­try had been on a de­cline on a y-o-y ba­sis. De­mand fell 5.8% in the Jan­uary-Fe­bru­ary pe­riod, ac­cord­ing to the DGCA, which prompted air­lines to re­duce their ca­pac­ity by 6.4%. Typ­i­cally, the March quar­ter isn’t as prof­itable as the De­cem­ber one, which forces air­lines to em­ploy a price-war strat­egy to at­tract trav­ellers. Jet Air­ways of­fered 70-75% dis­counts on tick­ets booked till Fe­bru­ary 27, for travel be­tween March 27 and Septem­ber. This pushed its to­tal rev­enues by 17.2% to .` 4,678 crore on a year-on-year ba­sis in the March quar­ter.

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