Jet hoping to raise Rs2,235 crore this quarter

Jet Airways is eyeing up to $350 million (about Rs1,740 crore) from the sale and leaseback of 20 aircraft this quarter and another $100 million (about Rs495 crore) from the sale of its Bandra-Kurla Complex property in Mumbai to Godrej.

This cash is crucial for the airline, which carries a debt of over Rs14,000 crore on its books and has an interest repayment of about Rs1,500 crore lined up in the second half of the current fiscal.

Jet officials said on a conference call with analysts on Monday that the airline had been operating in a fiercely competitive environment with limited pricing power in the September quarter and has, therefore, now embarked on a massive cost-cutting exercise to reduce expenditure by up to 10%.

This will include reduction in manpower, increase in aircraft utilisation as well as revenues from all its ancillary bases and renegotiation of all contracts.

DNA had reported last week that Jet may shut down two operation bases (Hyderabad and Bangalore), lay off contractual workers who are over 60 years and also junior employees who are being supplied by outsourcing agencies. The overall reduction in manpower could well be 10%.

Meanwhile, chief commercial officer Sudheer Raghavan said though fares have increased by 18-20% over the last few weeks on arrival of the busy season and also because Kingfisher Airlines withdrew some capacity suddenly, not all the spike in fuel costs during the second quarter has been passed on to consumers yet.

“Fuel prices have grown faster than our price increases. We expect Q3 to be better not only because prices have gone up by about 20%, but also because demand typically picks up in this quarter - corporate bookings are already surging for us,” Raghavan said.

Explaining the increase in costs during Q3, Raghavan said that the fuel bill was higher by Rs595 crore due to continued increase in prices; and rupee depreciation added another about Rs1,000 crore to the airline’s expenses due to forex fluctuations on aircraft loans and short-term borrowings.

And while he did not name Kingfisher, Raghavan said that the surge in corporate bookings during Q3 has happened because customers are finding his airline reliable. “When consumers are faced with unreliability, they tend to walk to competition.”

To a question on merger of JetLite with Jet Konnect, he said that by this March quarter the company will collapse the three existing brands (Jet Airways, JetLite and Jet Konnect) into two.

Local airlines come around on FDI in sector
The industry may be slowly getting around to the view that equity investment by foreign airlines in Indian carriers is not such a bad idea after all.

For the first time on Monday, Jet Airways signalled a softening of stand over this issue, saying it was “neutral” to any policy the government may formulate on this issue. In the past, Jet has been lobbying aggressively against it, while rival Kingfisher Airlines was pushing for it. Not just Jet, low-cost carrier SpiceJet also endorsed the move.

CEO Neil Mills told DNA that his airline is open to investment by foreign airlines in Indian carriers “in principle” and that this view has already been communicated to the government. “We are ok with this in principle. Whether we ourselves will get such an investment or not - that we will evaluate.”

The issue of foreign airline investment in Indian carriers is at the forefront now, with Kingfisher on the verge of bankruptcy and the Union commerce ministry pushing for 26% equity investment by foreign carriers.