Investors might remember how they got burned during Jet Airways’ market debut. The scrip, which listed at Rs 1,350, dropped to Rs 550 within a few months of listing. And even though investors who bought the stock at those depths have made a pretty penny (Jet now trades in the Rs 900-925 band), Naresh Goyal, Chairman, Jet Airways, isn’t taking any chances.
He’s put off the company’s proposed plan to raise $400 million (Rs 1,640 crore) through a secondary rights issue. “The global markets are pretty weak right now and I don’t feel we will get the valuations that we want,” Goyal remarked at an event to inaugurate Jet’s new service to Toronto.
Goyal claims that Jet is doing well, although the company has only been making money over the previous quarters through sale-leaseback of aircraft. Last quarter (ended June 2007), the company declared a net profit of Rs 30.8 crore on revenues of Rs 1,806.7 crore.
That said, Goyal did highlight the fact that recent quarters have also seen the establishment of new international routes, which have seen large amounts of capital invested in establishment costs, particularly of Jet’s new ‘scissor’ hub at Brussels.
Jet needs money because, as Goyal himself points out, planes cost money, “A Boeing 777 costs $250 million, which is why we need to raise funds for our expansion plans.” Jet wants to dramatically increase the number of planes in its fleet, particularly the long-haul ones such as the Boeing 777-300ers and the Airbus A330-200s—from eight today to as many as 40 (and maybe more) by 2011. “We will effectively be three airlines—one full-service domestic operation, our international operations and JetLite (formerly Air Sahara, which was acquired by Goyal),” says Goyal.
Indeed, Goyal is betting big on international services to fatten Jet’s profits. “By end-2008, we will have services from eight Indian cities to Brussels and to eight points in America,” he says.
Beyond the Brussels hub, Goyal also lets on that the airline is looking forward to start services between Mumbai and Shanghai and onward to San Francisco. And recently Jet received permission to fly to Kuwait, Muscat and Doha, becoming the first private Indian carrier to be allowed to fly on the lucrative Gulf routes from January 2008.
When asked about the possibility of Kingfisher entering the international market, Goyal denied rumours that he was playing an active role in scuppering Vijay Mallya’s plans. “We welcome competition, it will keep us on our toes, I have not being trying to prevent an airline from taking off,” he says.
Civil Aviation minister Praful Patel, who was also present, did not want to be drawn into the possibility of the current norms for international routes being changed. “We at the ministry have proposed a policy and that is now with the Cabinet, it is not in my hands,” Patel said. Goyal, on the other hand, is planning to worktogether with national carrier Air India on the ground handling services part.