Jet Airways' strategy of cutting down of domestic capacity and redeploying it on the international sector has yielded rich dividends. The airline posted Rs 93 crore profit for the third quarter FY13 in comparison to Rs 122 crore loss in the same period last year.
International operations accounted for 56 percent of Jet's revenue and almost 90 percent of the pre-tax profit (Rs 91 crore) on a stand alone basis in Q3 2013. "We decided to take capacity out of domestic routes and move it to international sector because of lower fuel costs and better yields. As soon as domestic market stabilises and starts to grow we will grow again. Bottom line is our primary focus," a top Jet executive stated.
Along with reduction in fuel expense due to lesser number of flights Jet also cut down on its wage bill. "Employee costs are down as most of the foreign pilots have left and due to reduction of staff in administration departments,'' he said
Jet's domestic capacity shrank 11 percent and it carried 13 percent less passengers in the last quarter but yields improved by 22.9 percent as the airline was able to charge higher fares on account of peak season demand. Loads too dropped 2.5 percent as Jet-JetLite (rebranded as Jet Konnect) market share in domestic market has been declining.
Yet despite operating fewer flights, Jet-JetLite still has the highest capacity on domestic sector (27 percent) compared to IndiGo (26 percent). But IndiGo carries more passengers and leads the market with 27.3 percent share as against 25.1 percent of Jet.
The airline is also leasing out excess wide body capacity. "We are looking to finalise the lease of four airbus A330s and two of them are likely to be leased to Oman Air. We have several options for Boeing 777 and will take decision in next ten days,'' the executive added. Jet has five Boeing 777s on lease to Thai and the lease term expires in next few months.
Over the past few months Jet has pulled out of loss making routes which helped in improving overall international performance. However this also led to instances of aircraft on ground in the short term, the impact of which for the quarter was approximately Rs.55 crore. These aircraft will be redeployed in the months to come, the airline said in a statement on Friday.
“All of our efforts on revenues, costs and network side have resulted in turning around the airline operations. This is despite higher fuel prices and rupee depreciation impact that we have had in the last few months. The combined impact of higher yields and lower costs (excluding fuel) have resulted in significantly lowering the breakeven seat factor levels in the business. We continue in our endeavor on cost cutting measures, exploring various avenues of ancillary revenues and process improvements across all segments of the business, which will help us improve the business further,'' Jet chief executive officer Nikos Kardassis said.
