Jet posts Rs 91 cr loss as domestic biz slips

Higher fuel costs and wage bill responsible for the dip.

The Indian skies have got fuzzier, with Jet Airways' domestic business making losses in the third quarter of this fiscal year.

The airline had always made money in the domestic sector despite increasing competition. However, despite slower capacity growth and a marginal (2.6 per cent) improvement in domestic yields, Jet posted a loss of Rs 14.4 crore in its domestic operations in the quarter ended December 31, 2007, mainly due to higher fuel and wage costs.

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While Jet Airways' domestic business has slipped, international operations which account for 37 per cent of its revenues have affected profitability.

Higher wage bill has been due to pilots graduating to international flights.

Interest and depreciation charges more than doubled as Jet inducted ten new planes.

Bogged down by losses in its nascent international operations and higher fuel costs, Jet declared a total net loss of Rs 91.1 crore for the third quarter, against a net profit Rs 40 crore in the corresponding quarter last fiscal.

That profit was largely on the back of the Rs 49.38 crore earned from the sale and leaseback on a Boeing aircraft. This year, Jet didn't sell any of its aircraft.

"Although the rise in fuel costs is offset by the fuel surcharge, 30-40 per cent of passengers who would have booked their tickets earlier, travel on a lower rate," said KG Vishwanath, who handles investor relations at the airline.

The major dip was due to the losses from international operations, a rising wage bill and higher interest and depreciation charges, which more than doubled during the quarter as Jet inducted ten new planes.

Jet's wage bill has shot up 34 per cent as it graduated its pilots on international flights, and hired expatriate pilots "� one-and-half times more expensive "� for domestic flights.

The losses in the international sector shot up to Rs 115.9 crore (against Rs 11.3 crore in the comparable quarter last fiscal) as it began flights to three new destinations in North America (New York, Newark and Toronto) and introduced wide-bodied aircraft for flights to Southeast Asia, which are being underutilised.

International operations now account for 37 per cent of Jet's revenues versus 21 per cent during the same quarter last year. The launch of Jet's flights to America coincided with a 20-30 per cent increase in capacity with Delta, American and Air-India flying non-stop once-a-day and Continental flying non-stop twice daily.

Analysts say that as first class and business class passengers are wedded to frequent flier relationships and code share-partner airlines, Jet is finding it tough to crack this market.

''It will take 12-18 months for these flights to break even,'' Jet Airways CEO Wolfgang Prock-schauer told Business Standard.

Shares of Jet Airways rose 0.68 per cent (Rs 5.05) on Monday, to close at Rs 748.05 on the Bombay Stock Exchange, on a day when the benchmark index fell 1.14 per cent.

"The numbers continue to be bad, though we were expecting higher losses on international operations," said an analyst with a foreign broking house who requested anonymity.

"Losses on domestic operations are a big surprise. The consolidation in the market has had no impact on Jet's domestic showing."