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Jet Airways' latest quarterly results are a cause of concern

The problems of Jet Airways might be small compared to Kingfisher's but they are quite big. Recovery, while not impossible, will take a while.

Kushan Mitra        Last Updated: January 30, 2012  | 12:23 IST

Kushan Mitra
Kushan Mitra
On the face of it, Jet Airways's third-quarter results where it posted a loss of Rs 101.22 crore is worrying enough, but one fact that few people raised is that that this was the first time in years that Jet Airways posted a loss in the October-December quarter. In fact, in previous years no matter how bad the rest of the year has been India's oldest private carrier has always managed to pull a rabbit out of its hat in the third quarter - the busiest months for airlines in India coinciding with the tourist season. Last year it made a profit of Rs 118 crore in the same quarter.

So what was so different this year? According to Jet Airways, the stronger dollar and higher fuel costs were a double-whammy and will continue to be a concern going forward.

Jet Airways has managed to keep itself out of the headlines thanks to the fact that it is not Kingfisher Airlines or Air India, the two airlines most in the news these days. But that does not mean that the Naresh Goyal-chaired airline is not troubled. It has a total debt exceeding Rs 8,000 crore.

It appears, however, that the airline management recognises that it faces a fight for survival and is taking measures to tackle this.

Some of the revenues that Jet Airways has been booking over the previous few quarters has come from the sale and lease back of some of their airframe and engine assets to leasing companies. Jet Airways, unlike most other Indian private carriers, still owns a significant number of planes in its fleet -  40 out of 100. Indigo owns none of its 45 planes and Kingfisher owns just a couple of their 60-odd aircraft.

This allows Jet Airways the scope to conduct a sale-leaseback on several aircraft in its fleet, which coupled with newer aircraft orders, mainly Boeing 737 and Boeing 787 aircraft, means a ready source of cash flows through sale and lease back. Not enough to wipe off the debt, but certainly enough to reduce it slightly.

The other measure the airline is taking is integrating the low-cost JetLite and Jet Konnect brands into one by May 2012. Jet Lite, the erstwhile Air Sahara had been kept as a separate entity because of the high-profile arbitration case that Jet Airways fought with the Sahara Group. A single brand and a single-operating license will help reduce costs for the airline considerably. However, for Jet to really recover from the doldrums, the airline will need to see premium traffic recover, which the airline claims is happening on domestic routes.

The problems of Jet Airways might be small compared to Kingfisher's but they are quite big. Recovery, while not impossible, will take a while.

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