Date:22/01/2006 URL: http://www.thehindubusinessline.com/2006/01/22/stories/2006012202590100.htm

Back Jet Air net dips 53 pc on fuel price hike
Cites payroll, lease rental costs as other reasons

Our Bureau

Mumbai , Jan. 21

JET Airways, the biggest domestic carrier after Thursday's board approval to acquire Sahara Airlines, on Saturday reported a 52.93 per cent decline in profit after tax for the quarter ended December 31, 2005, to Rs 61.01 crore from Rs 129.63 crore in the corresponding period last year.

Net income from operations was, however, up 22.35 per cent, at Rs 1,478.25 crore (Rs 1,208.24 crore for the year ago period).

"We achieved a positive result for the quarter despite industry-wide capacity addition that was far in excess of demand growth in the market, higher fuel costs that were not fully mitigated through fare increases and operating losses on our newly launched international routes.

"Profitability of our domestic business remains strong with seat factors consistently above 70 per cent.

"Going forward, we are focused on consolidating our leadership in the domestic market through several innovative and targeted sales and marketing initiatives, while simultaneously progressing towards break-even on our international operations," Mr Saroj Datta, Executive Director, Jet Airways, said in an official statement.

For the nine-month period, the company registered a 13.15 per cent dip in profit after tax to Rs 224.92 crore (Rs 258.99 crore) on a 29.78 per cent increase in net income from operations to Rs 4,068.43 crore (Rs 3,134.66 crore).

The reduced profitability of the third quarter follows the 11 per cent decline in profit after tax, which the airline had reported for second quarter in the financial year 2006.

Jet had ascribed that profit dip to increase in fuel, payroll and lease rental costs besides flood related disruptions. As with the third quarter, the second quarter, too, had shown a higher income on the strength of greater passenger volumes.

When contacted, Mr Datta pointed out that the profitability pattern had much to do with the operating environment, the intensity of competition and the onset of additional capacity. Yields have not recovered.

Shortage of pilots had pushed the airline to cancel over 1,000 flights during the October-November period, the start of peak season in air travel.

"Our income would show a rise despite all this because of fare revision and the addition of international routes," he said.

The airline had opened financial year 2006 with an 84 per cent growth in first quarter net profit, before the slide began. In a sense, the key to improved profitability lay with the industry itself.

"It depends on how much time it will take to realise what they can afford and what they cannot," Mr Datta said of competition's impact on outlook given two consecutive quarters of profit decline at Jet.

However, he maintained that sour results should not be construed to mean likely difficulty in digesting the all-cash acquisition of Sahara Airlines.

"I don't think that is a function of financial results,'' he said, pointing out that the effectiveness of the Rs 2,217 -crore-deal rested on how the integration of the two airlines was effected after due regulatory approvals.

If any thing goes wrong that should be blamed on the implementation of the integration process, not the vision that drove the acquisition in the first place, Mr Datta said.

According to him, the Jet Airways board has also approved the raising of funds for expenses, including aircraft acquisition.

The amount and timing is still undecided, though the exercise could tap domestic and international fund sources.