Jet Airways: Flying lower with Q2 losses of Rs55 crore

Rapidly falling domestic airfares because of rising competition and higher operating expenses continues to affect Jet Airways, the country''s largest domestic airline. The airline has reported a net loss for the second consecutive quarter and it looks increasingly difficult that the fortunes of domestic airline companies would improve anytime in the near future.

For the quarter ended 30 September 2006, Jet Airways has reported a net loss of Rs55.13 crore as compared to a net profit of Rs68.59 crore for the same quarter of previous year. The airline had reported a net loss of Rs44.98 crore for the previous quarter ended June 2006.

Excluding the profits from sale and lease back of aircrafts during the quarter, net losses would be much above Rs200 crore. Sale and lease back transactions would also lead to higher aircraft lease expenses in future and lead to higher losses in the coming quarters.

Operating revenues went up 26.21 per cent to Rs1,615.04 crore for the quarter as compared to Rs1,279.64 crore for the previous year quarter. Sequentially, operating revenues have declined marginally from Rs1,646.54 crore for the previous quarter.

The airline slipped into an operating loss of Rs124.2 crore, before considering other income, for the first quarter after its IPO last year. Jet had reported operating profits of Rs219.75 crore for the same quarter of previous year.

Staff costs jumped substantially to Rs224.65 crore from Rs124.05 crore for the previous year quarter. Fuel expenses shot up 69.95 per cent to Rs679.19 crore from Rs399.64 crore because of higher crude oil prices. Selling expenses including commissions went up 60.71 per cent to Rs208.46 crore from Rs129.71 crore.

Other operating expenses were higher by 15.47 per cent at Rs469.38 crore as compared to Rs406.49 crore. Aircraft lease expenses during the quarter were Rs157.56 crore.

Interest costs went up modestly by 2.72 per cent to Rs57.81 crore from Rs56.28 crore for the previous year quarter. Depreciation charges declined marginally to Rs96.69 crore from Rs97.29 crore.

Other income, including profits from sale and lease back of aircrafts, jumped more than 3.5 times to Rs206.19 crore from Rs44.6 crore for the previous year quarter. Other income was at Rs32.22 crore during the previous quarter.

Airline companies are reportedly in discussions to form an industry body to tide over the crisis. The body is expected to guide the industry on a more gradual addition of capacity and prevent further reduction in airfares. Though many analysts and consumer bodies have accused the industry of attempting cartelisation, the civil aviation ministry is apparently supportive of the industry''s efforts - obviously to help the government-owned airlines.

Jet Airways had announced a takeover of Air Sahara for Rs2,000 crore early this year, which was later called off because of differences between the groups and delay in getting regulatory approvals. The dispute is now under arbitration.

Jet Airways had advanced an amount of Rs500 crore to Air Sahara against pledge of Air Sahara shares and had kept Rs1,500 crore in a escrow account. The airline has withdrawn the amount kept in the escrow account after a court order and on furnishing a guarantee for a similar amount to the bank.