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Jet Airways replanning US strategy after FAA downgrade

Tuesday, 11 February 2014 - 6:00am IST | Place: Mumbai | Agency: DNA

Jet Airways, India's biggest carrier by number of passengers carried, said the downgrade by the United States's Federal Aviation Administration (FAA) of Indian aviation sector will not have any impact on its revenues.

The downgrade means that US carriers will not be permitted to code on Indian airlines while there are no such restrictions for Indian carriers. United Airlines suspended a marketing agreement with Jet after the downgrade.

"We do not expect any reduction in revenue due to the downgrade. Our operations in the US will continue as they are," said Raj Sivakumar, senior vice-president (alliances and planning) at Jet, said in an earnings call.

Jet, however, will not be allowed to expand its operations in the US till the downgrade is lifted.

"Indian carriers will not able to add services over and above the existing ones. However, we are in the process of replanning our strategies for the US market," said Sivakumar.

Jet and Air India are the only two Indian airlines that have presence in the US. Jet said out of its various international operations, its seat factor to the US was at 83% in the December quarter.

The airline lost almost Rs 268 crore during the quarter despite the peak festival season due to subdued domestic operations and high operating costs. It is in the process of expanding its international network with synergies with Abu-Dhabi based Etihad Airways, which has acquired 24% stakes in the Indian carrier.

Jet said it is looking at adding nine narrow-body aircraft in the next fiscal, most of which will be utilised for international operations. Over the last two years, the contribution of Jet's international operations to its overall revenues has increased from about 55% to 58%. As part of the network expansion outside India, the airline said it will launch Mumbai-Paris services by May this year and would look at connecting Asian cities such as Jakarta, Ho Chi Minh City and continue building strength within the Gulf region.

Despite the losses the airline expects the operations to be better by next fiscal as it is looking at replacing high-cost debt and selling or leasing its grounded wide-body aircraft.

It is in the process of replacing its high-cost domestic loans by raising almost $300 million through external commercial borrowings, resulting in saving $30 million on interest costs.

The airline has already sold off its two wide-body Airbus A330 in December, while it is in talks for leasing the rest three aircraft, which will help in saving $17 million," said Ravishankar Gopalakrishnan, chief financial officer and acting chief executive officer at Jet.

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