Jet Airways net profit slumps by 37%

Higher fuel prices has crimped the botttomline of Jet Airways Group in an otherwise good quarter, pulling down its net profit by 37% to Rs 186 crore year-on-year for the three months through December.

Though at a much lower print, this is the 11th straight profitable quarter for the second largest airline by revenue, which for the reporting quarter rose 10.2% at Rs 6,412 crore from Rs 5,817 crore, as its load factor increased 13.4% to 7.7 million passengers. Rising crude prices saw the airline's fuel cost increasing by 20% during the quarter, thereby increasing its overall operational cost, as airlines on average burn almost 40% of their cash on fuel alone. In the three months to December, its total expenses jumped to Rs 6,184.09 crore from Rs 5,635.43 crore a year ago. Revenue from passengers rose 11.7% to Rs 5,541 crore, while the same from cargo rose 39.3% to Rs 510 crore.

The profit numbers printed lower also because the Naresh Goyal-run airline had a one-time income of Rs 327 crore in the December 2016 quarter from sale and lease back of the aircraft, the company said in a statement today, adding against this the same stood at a low Rs 8.36 crore. "The net profit of Rs 299 crore in Q3 of FY17 included a profit of Rs 327 crore on account of sale and leaseback of aircraft," the airline said. Available seat kilometres (ASK) increased 8.7% to 14.98 billion with a marginal increase in the fleet, the company said, adding in percentage terms the passenger load factor rose by 4.4 points to 84, compared to 79.6% a year ago.

The airline said, CASK (cost per available seat kilometer), excluding fuel, further came down by 2.6% to Rs 3.02 from Rs 3.10 and it attributed this to the carrier's target of achieving a 12-15% reduction in non-fuel cost over the next couple of years. Traffic from codeshare partners rose 3.6% to 0.58 million passengers from 0.56 million passengers. Chief executive Vinay Dube said the airline will induct the more fuel-efficient Boeing 737 Max from June 2018, which should further help its operational efficiencies. During the quarter, it inducted five additional Boeing 737s into the fleet, helping it strengthen its domestic footprint and services, and thus increasing its capacity, which rose by 8.7%, he added. The company said higher expense was also due to higher duties on aircraft parts imports.

"Other non-current assets include certain customs duty and integrated goods and service tax (IGST) paid by the company under protest on reimport of repaired aircraft engines aggregating to Rs 151.14 crore. It has since filed an appeal with the appropriate authorities based on the advice received from experts. Pending adjudication, it has considered it as recoverable in the statement of assets and liabilities, it added. "Our efforts to bring in operational efficiencies for a healthier business continued to deliver results in the from progressive reduction in non-fuel costs, despite strengthening of the Brent price and lower domestic fares," he said.

Dube further said the efforts to streamline costs to ensure competitiveness reflected in the continued fall in our non-fuel CASK to Rs 3.02 during the quarter. "The process to rationalise our cost structure is an ongoing one and will continue. Notwithstanding our challenges of low domestic fares and the rise in fuel prices by almost 20%, we expanded our B737 fleet as well as overall capacity by 8.7%," he added. Gain on foreign currency fluctuations stood at Rs 141.51 crore against a loss of Rs 190.25 crore a year-ago.

It can be noted that during the quarter, the airline signed an enhanced cooperation agreement with Air France-KLM to widen its operations across Europe by connecting 106 destinations across the continent with 44 domestic cities. This agreement also complemented Air France-KLM and Delta Air Lines' Transatlantic partnership between Europe and North America, offering access to over 200 destinations in North America. The Air France KLM codeshare also includes cargo sector. These two alliances helped Jet Airways expand its codeshare traffic and carry 0.58 million passengers during the quarter, up 3.6% over the year ago period.

The group connects 64 destinations with a fleet of 119 aircraft, comprising Boeing 777-300 ERs, Airbus A330-200/300s, Next Generation Boeing 737s and ATR 72-500/600s. Ahead of the earnings, the Jet counter slipped 2.2% a Rs 803.45 on the BSE against a 0.42% correction in the benchmark Sensex today.