The carrier may have steered itself clear of an overvalued takeover bid, but its not the end of its financial troubles.
BANGALORE: The amputation of Air Sahara from itself has not spelled the end of Jet Airways’ financial troubles.
The full service carrier may have steered itself clear of an overvalued takeover bid by walking out of the deal, but declining yields, continued losses on overseas operations, depreciating rupee, rising interest rates and operational costs and economic fallout of the failed Sahara deal will continue to haunt Jet for the next few quarters, and pull down its profits, says a research report of Edelweiss Capital.
After reviewing Jet’s financials and the current market conditions, the broking firm concludes: “We believe that the next two quarters will see a deteriorating bottomline.”
The authors of the report, Nikhil Garg and Gautam Sinha Roy, believe intense competition in the domestic market has put the yields of Jet under tremendous pressure.
Despite a fuel surcharge of Rs 300 per passenger, its yields have not moved up proportionately. They expect the yields to dip further over the next few quarters with the ratio of full service passenger to discounted passenger going down to 35:65 from 45:55 at the beginning of the year.
The report also expresses concern over the soaring aviation turbine fuel prices, which is adversely impacting Jet’s profitability. It would also take a while for the airline to reap a profit from its overseas services, where it is facing stiff competition from British Airways and Singapore Airlines. Despite achieving a healthy average load factor of 70% on its international routes, it is still below the break-even level because of the heavy discounting by its rivals.
Jet has also not been able to do much to shore up its cargo revenues, which are disappointingly low at 5% as against the expected 12%. As if these internal financial troubles were not enough, it has gone ahead and added one more burden - that of the failed Sahara deal.
According to the report, Jet’s face-off with Sahara may reflect negatively on its balance sheet. In all probability, the non-refundable advance of Rs 100 crore and the Rs 80 crore pumped into Sahara’s operation is likely to be booked as loss in the current fiscal.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}