Jet draws up plan to soar again

Overseas float shelved; Rs 180 cr to be written off.

Jet Airways, having walked out of a deal to acquire Air Sahara and posted dismal results for the first quarter, is seeking to regroup itself through a slew of initiatives for shoring up its books, cutting costs, and guarding against uncertain market conditions overseas.

The domestic market leader today told a group of analysts in Mumbai that it had shelved its plan to raise $800 million through issue of American/Global Depository Receipts, "till the market conditions improve," and was likely to write off the Rs 180 crore spent on the aborted deal with Sahara.

It would sell four aircraft, and replace them with planes taken on lease, freeze recruitment in non-technical segments, take steps to reduce the payroll cost and other operating expenses, and re-negotiate agreements with fuel companies. It might also impose a fuel surcharge in the wake of the rise in prices of aviation turbine fuel.

These initiatives would improve the cash flow of the airline, which last year sold and took on lease five aircraft. "We will raise short-term loans worth $400 million from domestic banks and financial institutions to meet the requirements of pre-delivery payments," a Jet executive told Business Standard.

Jet and Sahara, after terminating their share purchase agreement, have separately moved courts in Mumbai and Lucknow.

Jet reported a net loss of Rs 45 crore for the first quarter of the current financial year, despite clocking a 25 per cent increase in revenue, which went up to Rs 1,680 crore.

The company said its overall financial performance was affected by factors like the continued yield pressure in the domestic and international operations, and an increase in fuel prices and other input costs.

The airline said the yields would remain under pressure for the running quarter, with increased capacity leading to an induced demand in the market.

"The near-term outlook remains challenging, with continued capacity induction expected in the domestic market. Over a 40 per cent increase is estimated in seats by the end of the current financial year. Things will be better by the third quarter," said a Jet executive.

On the fuel surcharge issue, he explained: "We are kick-starting fuel cost optimisation measures such as re-negotiation of agreements with fuel companies, a reduction in the effective aircraft weight, winglets installation and increased hedging of international fuel uplift."

The Jet Airways scrip closed 1.20 per cent down at Rs 507.35 on the Bombay Stock Exchange (BSE) today, against yesterday's close of Rs 513.50.