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Jet Airways posts US$198 million first quarter loss
August 31st 2018
Jet Airways’ money worries are more serious than previously expected.Read More » This week it reported a first quarter net loss of 13.2 billion (US$198 million), reversed from a 53.5 million rupee profit in the corresponding year-ago period.
The Mumbai-headquartered carrier blamed 36% higher fuel costs, a low fare environment and depreciation of the Indian rupee against the US$ for the poor performance to June 30.
“The rise in the price of Brent fuel, a depreciating rupee and a resulting mismatch between high fuel prices and low fares have adversely impacted the Indian aviation industry, including Jet Airways,” said airline CEO, Vinay Dube.
Jet Airways revenue improved 5.2% in the first quarter with capacity expanding 9.4% and traffic increasing 7.6%. Non-fuel unit costs decreased 1.5%. The carrier has commenced a new cost-cutting drive to reduce overheads by 12%-15% in the next two years.
The airline is seeking a capital injection of up to US$400 million from a new share issuance. The carrier’s current market capitalization is US$450 million, so issuing US$400 million in fresh shares would lead to a significant dilution of present shareholder equity.
Boeing has agreed to return a portion of the pre-delivery deposits Jet Airways paid when it ordered the first 75 of its 225 B737 MAXs on order. It goes without saying that Jet Airways will need to return those funds to Boeing when the worst is over.
Other measures to stop the airline’s financial haemorrhaging include wet-leasing part of its underutilized ATRs to other carriers, maintenance, distribution and labour productivity gains and selling a minority holding of its frequent flyer programme, JetPrivilege.
Jet Airways chairman, Naresh Goyal, expected these steps would “bode well for the long-term financial health and sustainability of the airline”.
Jet Airways has been struggling financially for years. For the financial year ended March 30, the airline announced a net loss of US$90.3 million, down from an INR15 billion net gain in the previous year. Jet Airways has posted overall losses in nine out of the last eleven fiscal years.
