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Stung by a record Rs 2,465-crore loss in the March quarter — the biggest ever by a private Indian airline in a quarter — Jet Airways on Tuesday said it would take tough decisions and follow a three-year business plan to clean its balance sheet, beside adopting a new network-and-fleet strategy.
At Rs 4,129 crore, Jet’s annual loss in 2013-14 was second only to Air India’s estimated Rs 5,400-crore loss last financial year. The loss was in spite of a Rs 2,057-crore equity infusion by Abu Dhabi-based Etihad Airways, which took a 24 per cent stake in the Indian airline last year.
The airline did not give out details of its ‘tough decisions’ but said those would do the groundwork for a financially healthy future.
In the March quarter, Jet Airways’ loss on a standalone basis was Rs 2,153 crore, while its subsidiary JetLite reported a Rs 312-crore loss. The parent company’s standalone loss included the Rs 700-crore impairment it took on account of JetLite’s continuing losses and networth erosion. The airline company’s consolidated loss had stood at Rs 743 crore in the same quarter the previous year.
Jet Airways has invested Rs 3,608 crore in JetLite — Rs 1,645 crore equity and a Rs 1,963-crore interest-free loan given to the subsidiary.
In the notes accompanying the profit-and-loss statement, Jet said it had appointed global advisory & investment banking firm Seabury to devise a fleet-and-network strategy for JetLite and the management had approved broad parameters to reorganise fleet and network between the two airlines. It had revalued its equity interest in the subsidiary and was taking a Rs 700-crore impairment on the basis of a Seabury study and the valuer’s assessment, Jet Airways said, adding it was considering shifting its 18 ATR aircraft to JetLite to boost the latter’s operations.
Besides the impairment, Jet Airways’ operational performance also proved a drag in the quarter. On a standalone basis, it incurred a cash loss of around Rs 1,150 crore. During the same period last year, it had reported a break-even at the operating level.
While the airline’s standalone revenue in 2013-14 (including income from lease of aircraft) increased 16.4 per cent to Rs 4,566 crore, its expenses grew 28.7 per cent. Other expenses, including maintenance and repair costs, almost doubled to Rs 2,418 crore. Its core revenue from passenger operations grew 9.3 per cent.
While the aviation industry saw an increase in capacity and passengers flown during the March quarter, Jet Airways reported a decline on both parameters. Its international operations lost Rs 843 crore. In same period last year, the airline had made a profit of Rs 238 crore in foreign operations.
According to a source, the jump in Jet’s maintenance cost was on account of engine-overhaul expenses. “A visit to a wide-body engine shop costs about $10 million. Jet Airways was unable to conclude contract with a maintenance repair overhaul unit in the March quarter which resulted in higher maintenance expenses. The airline reported a one-off maintenance cost of Rs 578 crore, which added to the loss amount.”
Jet Airways chairman Naresh Goyal said in a statement: “We need to take stringent measures to ensure our success in this challenging and competitive aviation industry. There can be no short-term solutions. The changes required will take time to implement... Our first priority on the journey to profitability will be to establish a more solid financial foundation for this airline.”
The airline also announced a series of initiatives to enhance its product and service offerings. These include standardisation and reconfiguration of the B737 fleet and seat count optimisation on the wide-body B777 and A330 fleets. It will also implement measures to better delineate the individual brands of both Jet Airways and JetKonnect in the domestic market.
Centre for Asia Pacific Aviation (Capa) had estimated the airline might post a loss of Rs 500-600 crore in the March quarter and about Rs 2,200 crore in the full financial year. Its chief executive for South Asia, Kapil Kaul, said: “In 2013-14, Jet’s performance deteriorated significantly as the management’s focus was on the Etihad deal and clearing regulatory challenges… The airline hit a historic low during the year. The sale of its frequent-flyer programme will improve its cash position significantly, while the debt-reduction efforts would ease interest burden. But a turnaround might take time and another round of equity infusion from Etihad.”
Cramer Ball to be new CEO
Jet Airways on Tuesday announced it had appointed Cramer Ball, a former Etihad Airways executive, as its new CEO. Until recently, Ball was the chief executive of Air Seychelles, where he was responsible for restructuring the operations and helped turn the airline profitable in 2012 and 2013.
