Autorickshaw rides, according to Union Minister Jayant Sinha, are more expensive than air travel by cost per kilometre. That may be hyperbole, but cheap airfares have inflicted pain on carriers when fuel prices surged.
How cheap is air travel? Cheaper than train rides at least. An air ticket for a Mumbai-Delhi bound flight may cost as low as Rs 2,200 if booked 15 days in advance, according to data compiled by BloombergQuint from MakeMyTrip, as of 2:00 p.m. on Sept. 5. That compares with lowest fare of Rs 2,400 charged by the Indian Railways, for air-conditioned travel, according to data compiled from Indian Railway Catering and Tourism Corporation. Similarly, cheapest air tickets cost lower than Mumbai-Kolkata rail ticket prices.
Excess seat capacity is behind low airfares. For the domestic aviation market, the available seat kilometre—the number of seats available multiplied by the number of kilometres flown—grew more than 30 percent in less than two years. That led to a double-digit growth in air passenger traffic in the world’s fastest growing aviation market.
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Also Read: Indian Aviation Sees Strong Passenger Growth In Seasonally Weak Month Of July
But increased competition meant airlines couldn’t increase fares with rising demand. Higher crude only made it worse. Prices of aviation turbine fuel, which contribute more than a third of an airline’s costs, rose 27.4 percent over the last year in India. That coupled with a weakening rupee eroded profit margin of domestic airlines.
Low fares aren’t sustainable due to rising input costs, Rahul Bhatia, co-founder and interim chief executive officer of InterGlobe Aviation Ltd., operator of IndiGo, told analysts in a conference call. The airline’s net profit was nearly wiped out in the quarter ended June on rising fuel prices, competitive fares and foreign exchange loss.
Yet, India’s largest carrier is behind the capacity surge that has in part pulled fares down. IndiGo contributed most of the fresh capacity added Indian airlines. In the last two years, the country’s largest airline added over 10 lakh seats—more than the combined seats added by Air India Ltd., Jet Airways (India) Ltd. and Spicejet Ltd.
And it’s expected to rise more as IndiGo continues to add A320 neo and smaller turboprop ATR aircraft to its fleet. The number of seats available on the airline, including international flights, is expected to increase 28 percent year-on-year for the ongoing September quarter and 25 percent for the full year.
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Also Read: Jet Airways’ Fate Hinges On Recapitalisation After Second Straight Quarterly Loss
Indian Aviation Sees Strong Passenger Growth In Seasonally Weak Month Of July
• Soumeet Sarkar@soumeet_sarkar
August 21 2018, 10:30 AMAugust 21 2018, 1:06 PM
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Airline passenger traffic in India, the world’s fastest growing aviation market, jumped in a seasonally weak month of July on capacity addition and lower fares.
The number of passengers rose 21 percent on a yearly basis to nearly 1.16 crore in the month, according to data released by Directorate General of Civil Aviation. Growth in July travel was better than the holiday month of May.
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The growth was primarily led by the country’s largest airline IndiGo, operated by InterGlobe Aviation Ltd. The budget carrier’s passenger growth stood at 31.5 percent – the highest in 18 months.
For IndiGo’s peers, July wasn’t that good a month.
• Air India’s passenger traffic growth fell for the fourth straight month to 11 percent.
• Jet Airways (India) Ltd.’s growth at 4.2 percent was higher than last month but below the industry average.
• SpiceJet Ltd.’s passenger growth of 5.1 percent was the lowest in 33 months.
Passenger load factor, a measure of capacity utilisation, increased for all listed airlines last month. SpiceJet reported the highest passenger load factor of 93.8 percent in the industry, staying above 90 percent for the thirty-ninth month in a row.
IndiGo’s market share rose to more than 42 percent—the highest in 20 months. The market share of the other major operators remained more or less stable compared with the previous month.
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IndiGo’s flight cancellation rate declined to 0.09 percent, the lowest in 28 months. The number of cancelled flights had spiked earlier in the year for the airline to due engine issues in some of its planes.
BloombergQuint
Jet Airways’ Fate Hinges On Recapitalisation After Second Straight Quarterly Loss
• Soumeet Sarkar@soumeet_sarkar
August 28 2018, 10:07 AMAugust 28 2018, 10:46 AM
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Recapitalisation has become a must for India’s second largest airline Jet Airways Ltd. amid a potential increase in debt after it reported highest-ever loss in the last three years in the first quarter. The Naresh Goyal-led airline reported a loss for the second consecutive quarter due to a weaker rupee, higher fuel prices and competitive fares.
Jet Airways’ total debt of Rs 8,424 crore would have increased as the company reported a cash loss of more than Rs 1,000 crore during April-June, according to data compiled by BloombergQuint. Due to this potential increase in debt, recapitalisation is imperative for the company for continuity of business operations, domestic brokerage SBICAP Securities said in a note.
The firm’s total debt ballooned to 12 times earnings before interest, tax and depreciation and amortisation as of March 31, compared with six times the previous year.
Jet Airways is facing a cash crunch as the competition intensifies in the Indian market leading to air fares so low that airlines can barely cover costs. Passenger yields, which measure average earnings made by airline company by flying a passenger per kilometre, for the operator declined by close to 2.5 percent.
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Rising global crude prices and inefficient aircraft increased the fuel cost per available seat kilometre, or CASK, for Jet Airways during the April-June period. Aviation turbine fuel prices were higher by 27 percent compared to last year, but airline company’s fuel cost per seat was higher by 37 percent. This is despite the fact that the airline has higher capacity on international routes where it enjoys lower taxes. That coupled with a weakening rupee led to erosion of profit margin for Indian airlines.
Also after seven quarters, the company failed to reduce its ex-fuel cost during April-June due to foreign exchange losses.
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Along with foreign exchange losses, employee, finance and aircraft maintenance costs also remained higher for the carrier. Jet Airways, which is looking to cut costs, has an employee cost that is even higher than that of state-owned Air India Ltd. Finance and aircraft maintenance costs remain higher due to higher debt and older fleet.
Jet Airways has plans to infuse funds, sell stake in its loyalty program and cut as much as Rs 2,000 crore in costs over the next two years, as part of a turnaround plan after reporting losses in at least 10 of the 16 financial years.
Also Read: Jet Airways to Consider Cost Cuts, Turnaround Plan Next Week
Jet Airways to Consider Cost Cuts, Turnaround Plan Next Week
• Debjit Chakraborty
August 22 2018, 4:44 PMAugust 22 2018, 7:51 PM
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(Bloomberg) -- Jet Airways India Ltd., the carrier that deferred earnings earlier this month, will consider a turnaround plan on Aug. 27 when its board meets to approve financial results for the quarter ended June.
The board will “take up the matters in relation to the cost reduction initiatives and turnaround plan, for which the management had earlier sought time,” Jet Airways said in a filing Wednesday. The company, part-owned by Etihad Airways PJSC, deferred its earnings originally scheduled for Aug. 9 by more than two weeks, saying management and auditors needed more time to finalize accounts.
Jet Airways, once at the forefront of India’s rapidly growing market for air travel, has been reeling under pressure from the challenge by budget carriers and surging fuel prices. It reported losses in all of the last 11 financial years but two, and needs to repay about $447 million in debt coming due through March 31.
The Mumbai-based company had total debt of 94.3 billion rupees ($1.4 billion), and cash and equivalents of 3.2 billion rupees for the year ended March 31, 2018, according to Bloomberg-compiled data. The firm’s total debt ballooned to 55.4 times earnings before interest and tax as of March 31, compared with 4.9 times the previous year, the data showed.
©2018 Bloomberg L.P.
Q1 Results: Jet Airways Reports A Loss For The Second Straight Quarter
• Isha Arora@IshaArora94
August 27 2018, 8:15 PMAugust 28 2018, 8:38 AM
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Jet Airways (India) Ltd., which had deferred announcing its results, reported a loss for the second straight quarter, hurt by surging fuel costs, competitive fares and foreign exchange loss.
The Naresh Goyal-led carrier reported a Rs 1,323-crore loss for the first quarter ended June compared with a Rs 54-crore profit in the year-ago period. Analyst estimates compiled by BloombergQuint had pegged the loss at Rs 495 crore. Jet Airways had posted a Rs 1,036-crore loss in the previous quarter.
• Revenue rose 6.4 percent year-on-year to Rs 6,010 crore. That was lower than the estimated Rs 6,323 crore.
• Ebitdar loss stood at Rs 382 crore.
• Margin contracted to -6.3 percent from 11.7 percent last year.
• The bottom line was hit by a forex loss of Rs 365 crore.
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India’s second-largest airline is facing a cash crunch as aircraft fuel expenses jumped 53 percent over the year-ago period. Aviation fuel in India is the most expensive in Asia due to higher taxes. Rising global crude prices have only made it costlier.
That coupled with a weakening rupee and cheaper ticket prices in a highly competitive market have led to erosion of profit margin for Indian airlines. Even the country’s biggest airline, IndiGo, wasn’t immune, reporting its worst profit in the quarter ended June. Being a full-service airliner, Jet Airways’ costs are higher compared to its budget peers.
Road Ahead
• The company management is considering cost cuts, debt reduction and funding options, including infusion of capital and monetisation of assets.
• Jet Airways plans to induct another 10 B737 MAX aircraft into its fleet during the year.
• The airline is looking to reduce non-fuel CASK (available seat miles) by 12-15 percent in the next 8-10 quarters.
• The company aims to reduce costs by Rs 2,000 crore over the next two years.
On Aug. 9, Jet Airways had deferred its financial results’ announcement as the audit committee didn’t recommend approval “pending closure of certain matters”. Earlier this month, the Economic Times had reported unnamed people that the company told its employees that won’t be able to operate for over 60 days without cutting expenses, including salaries.
Goyal had apologised to investors earlier this month as the airlines shares plummeted. “Lots of shareholders have lost money, I feel guilty and embarrassed,” Goyal had said. The airline has been the least preferred aviation bet among investors, with the stock declining over 66 percent in the year so far. Shares of the company closed 2.16 percent higher ahead of its earnings.
Also Read: Jet Airways Says Not Aware of Any Inquiry by Indian Government
BloombergQuint
Jet Airways Should Pull Out Of The Race To Offer Cheaper Airfare, Says Former Air India Director
• Mahima Kapoor@mahimakapoor12
August 06 2018, 3:04 PMAugust 06 2018, 3:50 PM
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Higher aviation turbine fuel prices, ageing fleet and the pressure of running a full-service airline are hurting Jet Airways Ltd. The only solution to these problems is to pull out of the “rat race” to offer cheaper airfare, said former Air India Director Jitender Bhargava.
Being a full-service airliner, Jet Airways’ costs are higher compared to budget peers like InterGlobe Aviation Ltd.-led IndiGo and SpiceJet Ltd.
“If Jet Airways is going to price its tickets at the same level as IndiGo, which doesn’t even provide food and other facilities, how is it going to break-even?” Bhargava pointed out in a conversation with BloombergQuint.
Also Read: Why HSBC Has Given Jet Airways Its Lowest Price Target
India is one of the world’s fastest-growing aviation markets, expanding at nearly 20 percent every month. But a price-conscious consumer base has prompted airlines to offer deep discounts, leading to a crisis like that of Jet Airways.
Are the airlines only looking at protecting their market share and not concerned about the economic viability? he questioned. “Are our airlines immature?”
Also Read: Why Jet Airways Is Facing A Crippling Cash Crunch
Why Jet Airways Is Facing A Crippling Cash Crunch
• Soumeet Sarkar@soumeet_sarkar
August 03 2018, 2:37 PMAugust 06 2018, 12:04 PM
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High debt, rising fuel prices and slower growth have crippled Jet Airways Ltd.
Shares of the full-service carrier fell as much as 7.8 percent, the most in nearly three weeks, after the Economic Times reported quoting unnamed people that the company told employees it can’t operate for more than 60 days without cutting expenses, including salaries. The airline has been the least preferred aviation bet among investors, with its shares falling more than 60 percent this year
The company, 51 percent owned by Naresh Goyal, may raise funds and the promoter may sell stake, another report by Mint said.
A company spokesperson, in a statement, said Jet Airways has taken measures to reduce costs. “Some of these include sales and distribution, payroll, and maintenance, among many others,” the email said, adding the management is in talks with “key stakeholders to enlist their full support and cooperation”.
It’s been a difficult year for airlines in the world’s third-largest aviation market as prices of jet fuel rose 20 percent, while competition drove ticket prices lower. No let-up is expected anytime soon.
Higher Costs
Everyone in the sector is vulnerable to this, more so Jet Airways because of its high-cost structure, Amrit Pandurangi, an aviation expert, told BloombergQuint. The tough phase may continue for another two quarters, he said.
Being a full-service airliner, Jet Airways’ costs are higher compared to budget peers like InterGlobe Aviation Ltd. and SpiceJet Ltd. The company tried to lower non-fuel costs through greater utilisation and better maintenance. That hasn’t been enough.
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The carrier needs to take many more steps to enhance its cost competitiveness, given aggressive pricing in the industry, said Santosh Hiredesai, an aviation analyst at SBICAP Securities.
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Forex Woes
As most of the expenses are dollar-denominated for an airline, a depreciating rupee means they need to pay more. And the Indian currency has weakened close to 8 percent this year, the most among Asian peers.
Slower Growth
Nearly 60 percent of Jet Airways’ flights are on overseas routes, the rest being domestic. The carrier’s traffic grew 14 percent in the domestic market in the last one year compared with the industry average of 19 percent.
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Jet Airways also lost market share to rivals during the period.
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Jet Airways’ market share on international routes has stayed around 14 percent. Half of its overseas capacity is deployed on routes to the Middle East, which is going through a slowdown. The carrier also faces tough competition in the region.
Debt Issues
Jet Airways has a weaker balance sheet compared with other listed peers. The carrier’s liabilities are higher than assets, giving it a negative net worth.
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While the airline was profitable in the last two years, it reported a loss of more than Rs 1,000 crore in the quarter ended March. Analysts tracked by Bloomberg estimated a loss of Rs 500 crore in the three months to June—the carrier is expected to report numbers on Aug. 10.
Recurring losses could push up debt, put more pressure on profitability and liquidity, SBICAP Securities said.
BloombergQuint
How cheap is air travel? Cheaper than train rides at least. An air ticket for a Mumbai-Delhi bound flight may cost as low as Rs 2,200 if booked 15 days in advance, according to data compiled by BloombergQuint from MakeMyTrip, as of 2:00 p.m. on Sept. 5. That compares with lowest fare of Rs 2,400 charged by the Indian Railways, for air-conditioned travel, according to data compiled from Indian Railway Catering and Tourism Corporation. Similarly, cheapest air tickets cost lower than Mumbai-Kolkata rail ticket prices.
Excess seat capacity is behind low airfares. For the domestic aviation market, the available seat kilometre—the number of seats available multiplied by the number of kilometres flown—grew more than 30 percent in less than two years. That led to a double-digit growth in air passenger traffic in the world’s fastest growing aviation market.
•
•
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Also Read: Indian Aviation Sees Strong Passenger Growth In Seasonally Weak Month Of July
But increased competition meant airlines couldn’t increase fares with rising demand. Higher crude only made it worse. Prices of aviation turbine fuel, which contribute more than a third of an airline’s costs, rose 27.4 percent over the last year in India. That coupled with a weakening rupee eroded profit margin of domestic airlines.
Low fares aren’t sustainable due to rising input costs, Rahul Bhatia, co-founder and interim chief executive officer of InterGlobe Aviation Ltd., operator of IndiGo, told analysts in a conference call. The airline’s net profit was nearly wiped out in the quarter ended June on rising fuel prices, competitive fares and foreign exchange loss.
Yet, India’s largest carrier is behind the capacity surge that has in part pulled fares down. IndiGo contributed most of the fresh capacity added Indian airlines. In the last two years, the country’s largest airline added over 10 lakh seats—more than the combined seats added by Air India Ltd., Jet Airways (India) Ltd. and Spicejet Ltd.
And it’s expected to rise more as IndiGo continues to add A320 neo and smaller turboprop ATR aircraft to its fleet. The number of seats available on the airline, including international flights, is expected to increase 28 percent year-on-year for the ongoing September quarter and 25 percent for the full year.
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Also Read: Jet Airways’ Fate Hinges On Recapitalisation After Second Straight Quarterly Loss
Indian Aviation Sees Strong Passenger Growth In Seasonally Weak Month Of July
• Soumeet Sarkar@soumeet_sarkar
August 21 2018, 10:30 AMAugust 21 2018, 1:06 PM
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Airline passenger traffic in India, the world’s fastest growing aviation market, jumped in a seasonally weak month of July on capacity addition and lower fares.
The number of passengers rose 21 percent on a yearly basis to nearly 1.16 crore in the month, according to data released by Directorate General of Civil Aviation. Growth in July travel was better than the holiday month of May.
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The growth was primarily led by the country’s largest airline IndiGo, operated by InterGlobe Aviation Ltd. The budget carrier’s passenger growth stood at 31.5 percent – the highest in 18 months.
For IndiGo’s peers, July wasn’t that good a month.
• Air India’s passenger traffic growth fell for the fourth straight month to 11 percent.
• Jet Airways (India) Ltd.’s growth at 4.2 percent was higher than last month but below the industry average.
• SpiceJet Ltd.’s passenger growth of 5.1 percent was the lowest in 33 months.
Passenger load factor, a measure of capacity utilisation, increased for all listed airlines last month. SpiceJet reported the highest passenger load factor of 93.8 percent in the industry, staying above 90 percent for the thirty-ninth month in a row.
IndiGo’s market share rose to more than 42 percent—the highest in 20 months. The market share of the other major operators remained more or less stable compared with the previous month.
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IndiGo’s flight cancellation rate declined to 0.09 percent, the lowest in 28 months. The number of cancelled flights had spiked earlier in the year for the airline to due engine issues in some of its planes.
BloombergQuint
Jet Airways’ Fate Hinges On Recapitalisation After Second Straight Quarterly Loss
• Soumeet Sarkar@soumeet_sarkar
August 28 2018, 10:07 AMAugust 28 2018, 10:46 AM
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Recapitalisation has become a must for India’s second largest airline Jet Airways Ltd. amid a potential increase in debt after it reported highest-ever loss in the last three years in the first quarter. The Naresh Goyal-led airline reported a loss for the second consecutive quarter due to a weaker rupee, higher fuel prices and competitive fares.
Jet Airways’ total debt of Rs 8,424 crore would have increased as the company reported a cash loss of more than Rs 1,000 crore during April-June, according to data compiled by BloombergQuint. Due to this potential increase in debt, recapitalisation is imperative for the company for continuity of business operations, domestic brokerage SBICAP Securities said in a note.
The firm’s total debt ballooned to 12 times earnings before interest, tax and depreciation and amortisation as of March 31, compared with six times the previous year.
Jet Airways is facing a cash crunch as the competition intensifies in the Indian market leading to air fares so low that airlines can barely cover costs. Passenger yields, which measure average earnings made by airline company by flying a passenger per kilometre, for the operator declined by close to 2.5 percent.
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Rising global crude prices and inefficient aircraft increased the fuel cost per available seat kilometre, or CASK, for Jet Airways during the April-June period. Aviation turbine fuel prices were higher by 27 percent compared to last year, but airline company’s fuel cost per seat was higher by 37 percent. This is despite the fact that the airline has higher capacity on international routes where it enjoys lower taxes. That coupled with a weakening rupee led to erosion of profit margin for Indian airlines.
Also after seven quarters, the company failed to reduce its ex-fuel cost during April-June due to foreign exchange losses.
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Along with foreign exchange losses, employee, finance and aircraft maintenance costs also remained higher for the carrier. Jet Airways, which is looking to cut costs, has an employee cost that is even higher than that of state-owned Air India Ltd. Finance and aircraft maintenance costs remain higher due to higher debt and older fleet.
Jet Airways has plans to infuse funds, sell stake in its loyalty program and cut as much as Rs 2,000 crore in costs over the next two years, as part of a turnaround plan after reporting losses in at least 10 of the 16 financial years.
Also Read: Jet Airways to Consider Cost Cuts, Turnaround Plan Next Week
Jet Airways to Consider Cost Cuts, Turnaround Plan Next Week
• Debjit Chakraborty
August 22 2018, 4:44 PMAugust 22 2018, 7:51 PM
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(Bloomberg) -- Jet Airways India Ltd., the carrier that deferred earnings earlier this month, will consider a turnaround plan on Aug. 27 when its board meets to approve financial results for the quarter ended June.
The board will “take up the matters in relation to the cost reduction initiatives and turnaround plan, for which the management had earlier sought time,” Jet Airways said in a filing Wednesday. The company, part-owned by Etihad Airways PJSC, deferred its earnings originally scheduled for Aug. 9 by more than two weeks, saying management and auditors needed more time to finalize accounts.
Jet Airways, once at the forefront of India’s rapidly growing market for air travel, has been reeling under pressure from the challenge by budget carriers and surging fuel prices. It reported losses in all of the last 11 financial years but two, and needs to repay about $447 million in debt coming due through March 31.
The Mumbai-based company had total debt of 94.3 billion rupees ($1.4 billion), and cash and equivalents of 3.2 billion rupees for the year ended March 31, 2018, according to Bloomberg-compiled data. The firm’s total debt ballooned to 55.4 times earnings before interest and tax as of March 31, compared with 4.9 times the previous year, the data showed.
©2018 Bloomberg L.P.
Q1 Results: Jet Airways Reports A Loss For The Second Straight Quarter
• Isha Arora@IshaArora94
August 27 2018, 8:15 PMAugust 28 2018, 8:38 AM
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Jet Airways (India) Ltd., which had deferred announcing its results, reported a loss for the second straight quarter, hurt by surging fuel costs, competitive fares and foreign exchange loss.
The Naresh Goyal-led carrier reported a Rs 1,323-crore loss for the first quarter ended June compared with a Rs 54-crore profit in the year-ago period. Analyst estimates compiled by BloombergQuint had pegged the loss at Rs 495 crore. Jet Airways had posted a Rs 1,036-crore loss in the previous quarter.
• Revenue rose 6.4 percent year-on-year to Rs 6,010 crore. That was lower than the estimated Rs 6,323 crore.
• Ebitdar loss stood at Rs 382 crore.
• Margin contracted to -6.3 percent from 11.7 percent last year.
• The bottom line was hit by a forex loss of Rs 365 crore.
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India’s second-largest airline is facing a cash crunch as aircraft fuel expenses jumped 53 percent over the year-ago period. Aviation fuel in India is the most expensive in Asia due to higher taxes. Rising global crude prices have only made it costlier.
That coupled with a weakening rupee and cheaper ticket prices in a highly competitive market have led to erosion of profit margin for Indian airlines. Even the country’s biggest airline, IndiGo, wasn’t immune, reporting its worst profit in the quarter ended June. Being a full-service airliner, Jet Airways’ costs are higher compared to its budget peers.
Road Ahead
• The company management is considering cost cuts, debt reduction and funding options, including infusion of capital and monetisation of assets.
• Jet Airways plans to induct another 10 B737 MAX aircraft into its fleet during the year.
• The airline is looking to reduce non-fuel CASK (available seat miles) by 12-15 percent in the next 8-10 quarters.
• The company aims to reduce costs by Rs 2,000 crore over the next two years.
On Aug. 9, Jet Airways had deferred its financial results’ announcement as the audit committee didn’t recommend approval “pending closure of certain matters”. Earlier this month, the Economic Times had reported unnamed people that the company told its employees that won’t be able to operate for over 60 days without cutting expenses, including salaries.
Goyal had apologised to investors earlier this month as the airlines shares plummeted. “Lots of shareholders have lost money, I feel guilty and embarrassed,” Goyal had said. The airline has been the least preferred aviation bet among investors, with the stock declining over 66 percent in the year so far. Shares of the company closed 2.16 percent higher ahead of its earnings.
Also Read: Jet Airways Says Not Aware of Any Inquiry by Indian Government
BloombergQuint
Jet Airways Should Pull Out Of The Race To Offer Cheaper Airfare, Says Former Air India Director
• Mahima Kapoor@mahimakapoor12
August 06 2018, 3:04 PMAugust 06 2018, 3:50 PM
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Higher aviation turbine fuel prices, ageing fleet and the pressure of running a full-service airline are hurting Jet Airways Ltd. The only solution to these problems is to pull out of the “rat race” to offer cheaper airfare, said former Air India Director Jitender Bhargava.
Being a full-service airliner, Jet Airways’ costs are higher compared to budget peers like InterGlobe Aviation Ltd.-led IndiGo and SpiceJet Ltd.
“If Jet Airways is going to price its tickets at the same level as IndiGo, which doesn’t even provide food and other facilities, how is it going to break-even?” Bhargava pointed out in a conversation with BloombergQuint.
Also Read: Why HSBC Has Given Jet Airways Its Lowest Price Target
India is one of the world’s fastest-growing aviation markets, expanding at nearly 20 percent every month. But a price-conscious consumer base has prompted airlines to offer deep discounts, leading to a crisis like that of Jet Airways.
Are the airlines only looking at protecting their market share and not concerned about the economic viability? he questioned. “Are our airlines immature?”
Also Read: Why Jet Airways Is Facing A Crippling Cash Crunch
Why Jet Airways Is Facing A Crippling Cash Crunch
• Soumeet Sarkar@soumeet_sarkar
August 03 2018, 2:37 PMAugust 06 2018, 12:04 PM
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High debt, rising fuel prices and slower growth have crippled Jet Airways Ltd.
Shares of the full-service carrier fell as much as 7.8 percent, the most in nearly three weeks, after the Economic Times reported quoting unnamed people that the company told employees it can’t operate for more than 60 days without cutting expenses, including salaries. The airline has been the least preferred aviation bet among investors, with its shares falling more than 60 percent this year
The company, 51 percent owned by Naresh Goyal, may raise funds and the promoter may sell stake, another report by Mint said.
A company spokesperson, in a statement, said Jet Airways has taken measures to reduce costs. “Some of these include sales and distribution, payroll, and maintenance, among many others,” the email said, adding the management is in talks with “key stakeholders to enlist their full support and cooperation”.
It’s been a difficult year for airlines in the world’s third-largest aviation market as prices of jet fuel rose 20 percent, while competition drove ticket prices lower. No let-up is expected anytime soon.
Higher Costs
Everyone in the sector is vulnerable to this, more so Jet Airways because of its high-cost structure, Amrit Pandurangi, an aviation expert, told BloombergQuint. The tough phase may continue for another two quarters, he said.
Being a full-service airliner, Jet Airways’ costs are higher compared to budget peers like InterGlobe Aviation Ltd. and SpiceJet Ltd. The company tried to lower non-fuel costs through greater utilisation and better maintenance. That hasn’t been enough.
•
•
•
The carrier needs to take many more steps to enhance its cost competitiveness, given aggressive pricing in the industry, said Santosh Hiredesai, an aviation analyst at SBICAP Securities.
•
•
•
Forex Woes
As most of the expenses are dollar-denominated for an airline, a depreciating rupee means they need to pay more. And the Indian currency has weakened close to 8 percent this year, the most among Asian peers.
Slower Growth
Nearly 60 percent of Jet Airways’ flights are on overseas routes, the rest being domestic. The carrier’s traffic grew 14 percent in the domestic market in the last one year compared with the industry average of 19 percent.
•
•
•
Jet Airways also lost market share to rivals during the period.
•
•
•
Jet Airways’ market share on international routes has stayed around 14 percent. Half of its overseas capacity is deployed on routes to the Middle East, which is going through a slowdown. The carrier also faces tough competition in the region.
Debt Issues
Jet Airways has a weaker balance sheet compared with other listed peers. The carrier’s liabilities are higher than assets, giving it a negative net worth.
•
•
•
While the airline was profitable in the last two years, it reported a loss of more than Rs 1,000 crore in the quarter ended March. Analysts tracked by Bloomberg estimated a loss of Rs 500 crore in the three months to June—the carrier is expected to report numbers on Aug. 10.
Recurring losses could push up debt, put more pressure on profitability and liquidity, SBICAP Securities said.
BloombergQuint
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