Mumbai: Jet Airways (India) Ltd posted its biggest-ever quarterly loss in the three months ended 31 March as a slump in demand forced the nation’s second-largest airline by market share to offer discounts and the company took two significant charges related to its investment in its low-fare subsidiary and maintenance costs.

The Naresh Goyal-controlled airline said its March quarter loss widened to ₹ 2,153.57 crore, its fifth straight quarterly loss, from ₹ 495.53 crore a year ago. Sales rose 16.4% to ₹ 4,566.17 crore from ₹ 3,921.92 crore in the year-ago period. The earnings exclude those of its units. Analysts surveyed by Bloomberg had estimated Jet Airways to post a loss of ₹ 150 crore for the quarter on sales of ₹ 4,863 crore.

Jet Airways’ board named Cramer Ball as the chief executive officer of the company. Ball had earlier this year completed a two-year term as the CEO of Air Seychelles, where he had led a restructuring programme that returned the airline to profitability. The new CEO will face the tough challenge of turning around Jet Airways, which is struggling with high jet-fuel prices, steep airport fees and intense competition amid slowing demand.

Jet Airways has been without a full-time chief executive since January and even its acting CEO Ravishankar Gopalakrishnan resigned in April, becoming the fifth senior airline executive to quit since the airline sold a 24% stake to Etihad Airways PJSC last year.

Jet Airways’ performance has deteriorated significantly as the management focus was on the deal with Etihad and clearing regulatory challenges, said Kapil Kaul, CEO (South Asia) at consulting firm Capa Centre for Aviation. “Nothing is visible in terms of performance except the largest-ever loss which is almost 20% more than the combined loss from FY07-FY13. Jet Airways in FY 14 has hit a historic low," Kaul said.

Jet Airways’ fuel costs rose 15.2% to ₹ 1,906.39 crore in the quarter from a year earlier while other expenses jumped 50% to ₹ 2,418.46 crore.

In a separate statement issued hours after the earnings announcement, Jet Airways said airline consultant Seabury APG has completed a new long-term network and fleet plan that will be implemented to optimize Jet Airways’ domestic and international operations.

Chairman Goyal said his airline needs to take stringent measures in this challenging and competitive environment. “There can be no short-term solutions. The changes required will take time to implement," Goyal said. “Our first priority on the journey to profitability will be to establish a more solid financial foundation for this airline," he added.

As part of the plan, the Jet Airways’ board and management team has started work on cleaning up the company’s balance sheet, writing down overvalued non-cash assets.

In the March quarter, Jet Airways reported a one-time maintenance write-off of ₹ 783.10 crore and a ₹ 700 crore charge related to impairment of goodwill on its investment in low-fare unit Jet Lite (India) Ltd.

Excluding the two write-offs, Jet Airways’s loss for the reporting quarter is around ₹ 670 crore. Jet Lite (India) reported a loss of ₹ 312.70 crore for the March quarter compared with a ₹ 248.1 crore loss in the year-earlier period.

Jet Airways also logged a seventh straight annual loss in 2013-14 as fuel prices and airport costs remained stubbornly high. It reported a loss of ₹ 3,667 crore for the fiscal year, more than seven times the ₹ 485.5 crore loss it reported in the previous year. In other words, Jet Airways has lost an average of ₹ 8.7 crore every day that it flew in the country with a domestic market share of around 22%.

Continuous losses at Jet Airways have resulted in a substantial erosion of the company’s net worth, compelling the airline to explore options for raising money to meet operational and financial obligations.

The March quarter is considered a lean season for Indian airlines as demand for tickets slump after peaking during the festival season in the preceding three months.

In Tuesday’s board meeting, the company decided to establish a taskforce to implement a major restructuring of the business, following a cost benchmarking study by independent advisors. It also announced a series of initiatives, including standardization and reconfiguration of the B737 fleet, seat count optimization on the wide-body B777 and A330 fleets and implementation of measures to better delineate the individual brands of both Jet Airways and JetKonnect (all-economy brand) in the domestic market.

Etihad Airways president and CEO James Hogan and the airline’s chief financial officer, James Rigney, attended the board meeting for the first time.

Jet Airways is not the only Indian airline that is reporting mounting losses. Rival SpiceJet Ltd posted a record loss of ₹ 1,003.24 crore in 2013-14. The loss widened five times from ₹ 191.07 crore a year ago. The Kalanithi Maran-controlled SpiceJet lost an average of ₹ 2.75 crore every day that it flew in the country with a domestic market share of nearly 20%. In the March quarter, India’s second largest budget airline SpiceJet’s loss widened to ₹ 322 crore from ₹ 186 crore year ago.

The Indian domestic passenger market expanded 4% in 2013, according to the Directorate General of Civil Aviation.

There is still too much capacity and air fares are still falling, according to Bharat Mahadevan, a consultant who was regional manager for north-east Asia at Jet Airways.

“It has to be noted that this is a year when there is no economic crisis (like in 2008) or where fuel prices have remained fairly stable and the dollar has remained fairly stable except for one or two months of volatility," Mahadevan said.

He said Jet Airways’ loss indicates that there could be another round of consolidation with some carriers exiting the market.

Competition is set to intensify as Tata Sons Ltd has forged two joint ventures with AirAsia Group Bhd (for a budget airline) and Singapore Airlines Ltd (for a full-service airline). While AirAsia India has secured final approval, the Tata-Singapore Airlines venture is awaiting it.

Shares of Jet Airways dropped 3.53% to ₹ 268.15 on BSE, while the benchmark Sensex lost 0.68% to 24,549.51 points. The results were announced after the end of trading on Tuesday.

Subscribe to Mint Newsletters * Enter a valid email * Thank you for subscribing to our newsletter.

Share Via