Jet Airways India, whose performance is treated as the barometer of the prevailing trend in the airline industry, managed to contain losses for
FY10. On a consolidated basis, for FY10, Jet has been able to cut down losses by over half to Rs 420 crore from Rs 960 crore earlier.
Four important factors contributed to this: postponement of capacity addition, adhering to the low-cost carrier (LCC) model, resorting to increasing shorter haul routes and a double-digit growth in passenger numbers.
In the March 2010 quarter, in the domestic market, the company recorded a jump of 24% in its earnings before interest depreciation tax amortisation and rentals (EBIDTAR) — an operational performance barometer of an airline company — on a Y-o-Y basis. Its revenues grew by 12% to Rs 2,870 crore in comparison to the previous year, while its net profit grew by 9.4% to Rs 58 crore for the same period.
On the domestic front, the company recorded a load factor of 72.9% from 64% in the March 2009 quarter. The company’s revenues from international operations grew by 13% to Rs 1,621 crore on a Y-o-Y basis. Also, for international operations, the EBITDAR improved by 10% to Rs 367 crore for the quarter in comparison to the previous year.
For the aviation industry, the past two quarters have been profitable ones. Not only the low-cost carriers, but also full service carriers, have been able to register good passenger growth. Jet Airways itself registered growth for the four consecutive months in its passenger numbers. The company, for the past three quarters, had been consciously adding fewer aircraft. Normally, an airline adds 4-5 aircraft on a yearly basis, Jet Airways, however, for the calendar year 2010, would be adding at most two aircraft, while it postponed the aircraft schedule to come by around 18 months.
This shows that the company wants to utilise its existing capacity to the fullest. Also, by resorting to shorter-haul international routes, such as Bombay-Kathmandu, Delhi-Hong Kong and Bodh Gaya-Bangkok, the company’s overall network revenues have grown well. More so, the success of its low-cost offering, Jet Konnect, contributed substantially to the company domestically — in December ’09 itself, out of 2.4 million passengers the company carried, around 1.57 travelled on Jet Konnect.
Going forward, we believe that the aviation industry still faces many uncertainties. It’s estimated that factors such as SpiceJet flying internationally and GoAir raising money through an IPO may lead to addition of 15 aircraft to the domestic fleet. This would raise the industry’s capacity by around 5-6%. Any capacity addition of more than 8% would be a concern for players, as there’s already overcapacity and will thus put pressure on yields.
In FY10, Jet Airways’ revenue-per-KM declined by around 20% to Rs 3.54 on a Y-o-Y basis. Also, on a consolidated basis, for FY10, the company’s revenues from operations have fallen by around 9% when compared to FY09. Even on the domestic operations front, in the March 2010 quarter, the company’s revenue-per-KM declined 11% to Rs 5.47. Unless airlines begin recording a higher growth in yields, the situation would continue to be uncertain for investors and companies alike.
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