Jet, which reports its first full quarter results under Ball today, has tailwinds in form of easing fuel prices and synergies with Eithad, but also reels under a huge debt burden
Almost five months after Jet Airways brought on board turnaround specialist Cramer Ball as chief operating officer in May, the loss-making Indian airline major is far away from revival.
Despite certain tough decisions taken by the airline in the past few months, experts feel not much has changed within the airline and it continues to bleed.
According to analyst estimates, the airline is likely to report today a rise in losses in the July-September quarter sequentially owing to lean domestic season, while year on year, the losses could shrink to Rs 700 crore from Rs 891 crore in the year-ago period.
Profits from international routes are also expected to surge, said the analysts.
Sources with Jet said Ball is presently involved himself in controlling costs by getting into the details in the way the airline was previously run.
The new CEO aims to increase revenue from international to 63% by the end of this fiscal from 45% currently. For domestic operations, the airline plans to make use of smaller turboprops to connect smaller cities.
Sources said before formally taking over as CEO, Cramer, who is known for taking some tough decisions, strongly stood behind the decision to close the low-cost subsidiary JetLite.
The unit was shut in order to concentrate on its full-service carrier as the management felt multiple brands were creating confusion in the mind of the travellers.
Ball was not available for comment due to the 'silent period' (period preceding the financial result announcement) the airline is going through, when its executives don't interact with the media till the results are out.
46-year-old Ball, who was brought in by Jet's equity partner Etihad Airways as part of the revival plan, is hopeful of turning around Jet's operations by 2007.
An Australian national, Ball had turned around the loss-making Air Seychelles, in which Etihad holds 40%, within two years of his tenure.
Industry experts said Ball will have to address several issues at the airline including rising competition with the entry of new airlines like Vistara and AirAsia India.
"India is easily one of the toughest aviation markets in the world. Here, ATF is the costliest; airport charges and aircraft lease costs are high; empty aircraft have to be flown out of India for maintenance and repair; there's cut-throat competition and passengers are extremely price sensitive. This market will require all the experience, relationships and inner strength that Cramer brings in. If he can do well here, he will rock anywhere," said Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG.
Ball's appointment in May came close on the heels of the record loss of Rs 2,153.57 crore the airline reported for March quarter of 2013-14 and its highest-ever annual loss of Rs 4,129 crore.
"We need to understand that Air Seychelles operations are smaller compared to Jet Airways. Hence the turnaround was shorter. The biggest challenge for Ball in India is to reduce the huge debt burden," said an analyst from a domestic brokerage firm, who refused to be quoted.
Jet's debt, which was Rs 10,576 crore by the end of last financial year, got reduced to Rs 9,807 crore in June end. The airline managed to reduce its losses by 26% in the first quarter of this fiscal to Rs 258 crore on account of increased fleet utilisation and improved yields.
"International is already at that break-even levels and that is performance for quarters that did not have significant alliance effects because the alliance effects have really only kicked in from May-June onwards and we are seeing very, very strong performance especially in our codeshare partnership with Etihad. We expect to continue to improve either partly because of the codeshare partnerships that we are following partly because of the way that we are expanding and flowing traffic through our hubs and optimizing those traffic flows," a Jet Airways executive told analysts during an earnings call post Q1 FY15 results.
Experts said stable crude price and cost synergies with Etihad will also play key role in turning around the operations within the estimated timeframe.
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