Jet Airways flies into Rs 1,261 loss in second quarter

Naresh Goyal-promoted Jet Airways on Monday reported a consolidated net loss of Rs 1,261 crore for the second quarter (Q2) ended September 30, 2018. The carrier had posted a net profit of Rs 71 crore during the corresponding period last fiscal.

The airline's current liabilities exceed its current assets. The management blamed the rising aircraft fuel cost that increased over 50%, depreciating rupee, a challenging airfare pricing situation in a domestic market with over capacity among the prime reasons for the continued losses. The company had declared Rs 1,323 crore of loss during the previous quarter.

A back of the envelope calculation shows that Jet Airways has been losing around Rs 14 core every day. In comparison, the debt-ridden national carrier Air India's per day losses were at less than Rs 10 crore last year.

Concerned over the severe losses, Jet Airways, which is working on a turnaround strategy, is believed to be in talks with a few private equity firms and corporates including Tata Sons for fund infusion.

The point of contention, according to reports, has been a controlling stake of 51% that Tata Group is demanding while Goyal is said to be opposing it. Mumbai-based Tata Group, which already runs two airlines in India – the full-service carrier (FCC) Vistara and low-cost carrier (LCC) AirAsia – wants to merge Jet Airways with the former.

Additionally, Jet Airways's management said it plans to save around Rs 2,000 crore over the next couple of years by the way of sub-leasing some of its fleet, renegotiation of contracts, better utilisation of resources, etc. Cost saving of over Rs 500 crore has already been realised to date (in H1FY19), the airline said in a statement.

Analysts say that while the industry is in adding capacity despite the massive losses, Jet Airways has consciously begun to reduce it. Airlines increased domestic capacity by 18% during Q2 of this financial year (FY), but Jet Airways reduced it by 4%. Similarly, while the industry capacity grew 14% (Q2FY18), 14% (Q3FY18), 18% (Q4FY18), 18% (Q1FY19), Jet Airways recorded an increase of just 6.7%, 6.7%, 6.6%, 6.8%, respectively.

According to industry observers, Jet Airways has been facing headwinds for the past few quarters. The deciding point came in August after the top management of the airline told its employees that it will not be able to survive beyond 60 days if cost rationalisation measures were not taken. Though the airline denied the reports, it accepted that cost-cutting measures were on.

The carrier has also been losing market share. The latest figures available with regulatory body Directorate General of Civil Aviation (DGCA) reveal that the airline's share has been reduced to 15.4% in the domestic market from 15.6% at the beginning of the year.

Jet Airways's poor performance comes on the heels of market leader IndiGo posting a Q2 loss of Rs 652 crore last month, its first since getting listed in November 2015. In comparison, IndiGo had earned a profit of Rs 551.6 crore in the year-ago period.

LCC SpiceJet will be releasing its results later this week. The Ajay Singh-promoted airline had reported a Rs 38 crore loss in the last quarter.

A Mumbai-based analyst said the situation is bad for the entire industry and not just a few airlines. "However, very few airlines like IndiGo have the deep pockets to fight the headwinds," the analyst added.

AMID HIGH TURBULENCE

Rs 1,261 crore – Losses in second quarter ended September 30

4% – Capacity cut undertaken by Jet Airways in Q2