JetLite, Passenger Growth a Drag on Jet
High capacity, strong dollar also hurt company
RAJESH N NAIDU
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.