| The second quarter is traditionally characterized by lower seat factors relative to other periods of the year; for the quarter just ended, domestic seat factor was 65.6%, versus 71.8% in the same period a year ago. We generated a pre-tax profit on our domestic operations of Rs. 389 million (US$ 8.5 million) versus a pre -tax profit of Rs. 1,391 million (US$ 31.6 million) in the same period a year ago. This includes a profit of Rs. 1,617 million (US$ 35.2 million) on the sale and subsequent lease-back of 3 Boeing 737 aircraft in the second quarter of this year; excluding the sale -leaseback, our domestic operations generated a pre -tax loss of Rs. 1,226 million (US$ 26.7 million). |
| Factors driving our performance in the second quarter included: |
| Continued expansion of industry capacity: Approximately 140,000 seats per day were offered industry-wide in September 2006, as compared to 128,000 seats per day in April 2006 and approximately 100,000 seats per day in September 2005 . Our capacity increase during the second quarter versus the same period a year ago was around 15%. The demand-supply imbalance has resulted in a soft yield environment for the industry. |
| Fare-induced demand growth: Industry-wide passengers carried grew by approximately 45% to an estimated 7.5 million, although a significant portion of this increase was induced by low fares. We carried 2.3 million passengers during the quarter, about 172,000 passengers more than the same period last year. As a result of widespread fare discounting, industry-wide average revenue per passenger was lower by 15% versus a year-ago. However, our average discounted fares remain above the industry average. Our full-fare versus discounted fare mix remains at approximately 35:65. |
| Increase in fuel and other operating costs: Fuel costs were higher by Rs. 1,726 million (US$ 37.6 million) during this quarter versus the same period a year ago. Included in this figure is an impact of approximately Rs. 270 million (US$ 6 million) due to congestion -related delays at major airports such as Mumbai and Delhi. Fuel surcharges did not help us recover the additional impact from higher fuel prices in the quarter. The full impact of fuel surcharge at Rs. 750 levels will only be realized in the coming quarters. |
| Personnel costs were higher mainly due to increase in average staff numbers from 8,189 to 9,340 on account of the increase in level of operations. The increase is also due to the composition of additional staff recruited, that is, pilots including expatriates, engineers and cabin crew as well as annual increments given to staff. Selling and distribution expenses were highermainly on account of higher revenues and higher cargo commissions paid to travel agents. International operations International operations accounted for 17% of revenues in the second quarter, as compared to 12% in the second quarter of last year. |
| The combination of a lean season, capacity induction by competitors on our key routes and the addition of new frequen cies resulted in our international operations generating a pre-tax loss of Rs. 1,114 million (US$ 24.3 million) versus a pre -tax loss of Rs. 283 million (US$ 6.4 million) in the same period a year ago. We commenced two new routes during this quarter, Amritsar- London Heathrow (three times a week) and Delhi-Singapore (daily), and we added our second daily frequency on the Mumbai-London Heathrow route. Aggressive industry-wide fare discounting continued to impact yields. |
| We have renewed our focus on route-level partnerships with major carriers in order to expand our market base and provide seamless connectivity to our passengers. Notable among these partnerships was our agreement with Qantas on the Delhi-Singapore route, whereby Jet Airways passengers to Singapore can now connect with onward Qantas flights to five Australian cities. |
| Turnaround measures implemented |
| We have implemented a comprehensive turnaround programme encompassing both our domestic and international operations. In order to expand our international market base further, we have concluded bilateral partnership agreements with major carriers globally. We are also looking at increasing cargo revenue, especially with regard to international operations. We remain focussed on reducing unit cost of operations in parallel with improving revenues. Some of the key cost reduction initiatives include: |
| · Improved asset utilization: we have already achieved a 14% increase in aircraft utilization during this quarter over the same period a year ago. |
| · Improved fuel management: important initiatives include reduction in effective aircraft weight and winglets being fitted on all new aircraft. We will, in a phased manner, also install winglets on existing aircraft. |
| · Re -negotiation of contractual agreements: We are in the process of re-negotiating contractual agreements with various service providers and suppliers in order to achieve improved rates and have already achieved success in key areas. |
| · Reduction in overheads: We are putting in place measures to achieve close to a 10% reduction in administrative overheads. |
| · Focus on improving process efficiencies: We are focussing on web-based sales (e.g. via new web-based booking engines to be in place by the third quarter) and other process automation initiatives in order to achieve unit cost reduction in the medium to long term. Outlook |
| The near-term outlook remains challenging even as we enter the traditionally stronger second half of the year. We have implemented various network initiatives in order to take advantage of the onset of the peak season from October. We expect to induct 6 additional aircraft into our fleet by March 2007. Capacity additions in the industry as well as rational pricing initiatives are critical variables that could affect overall performance. |
| Awards and Recognition |
| · In July 2006, Jet Airways received the Aviation award in the NDTV Profit Business Leadership Awards 2006. |
| · In September 2006, Jet Airways won the award for the 'Best Overall In -flight Entertainment' and the 'Best Single In-flight Audio Program' conferred by the prestigious World Airline Entertainment Association. We were judged the best airline for 'Overall In -flight Entertainment' in the Small Fleet Category. Jetwings, our in-flight magazine also earned the distinction of second runner up for the 'Best In -flight Magazine' award. Our in -flight entertainment product has gained worldwide recognition and appreciation within 16 months of its launch. |
| · In September 2006, Jet Airways was voted "India's Leading Airline" by travel professionals worldwide at the 13th Annual World Travel Awards 2006. |
| · In October 2006, Jet Airways was voted "India's best airline" at the 17th Annual Travel Awards 2006 function of TTG Travel Asia (Travel Trade Gazette) held at Pattaya, Thailand. We have won this prestigious award for the third consecutive year and fourth time in the past five years. |
| About Jet Airways |
| Jet Airways currently operates a fleet of 45 classic and next generation Boeing 737 - 400/700/800/900 aircraft, 3 Airbus A340 -300E aircraft, 1 Airbus A330-200 and 8 modern ATR 72-500 turboprop aircraft. With an average age of around 5.3 years, the airline has one of the youngest aircraft fleet in the world. Close to 30,000 passengers travel daily on Jet Airways' 330 flights to 49 destinations that span the length and breadth of India and beyond, including Colombo in Sri Lanka, Kathmandu in Nepal, Singapore, Kuala Lumpur in Malaysia and London Heathrow, UK. Since inception in May 1993 until end -June 2006, Jet Airways has flown close to 66 million passengers. |
Top Section
Explore Business Standard