LIVE TV DownloadNews18 App
News18 English
Powered by cricketnext logo
3-min read

Cash-strapped Jet Airways Reports Rs 1,323 Crore Net Loss, Draws up Strategy to Cut Costs

The ongoing cash crunch has forced the airline to embark on a Rs 2,000-crore cost cutting drive and stake sale in its loyalty programme Jet Privilege as part of capital infusion.


Updated:August 27, 2018, 11:54 PM IST
Cash-strapped Jet Airways Reports Rs 1,323 Crore Net Loss, Draws up Strategy to Cut Costs
Representative image/Reuters
Mumbai: Cash-strapped Jet Airways, which on Monday reported a whopping Rs 1,323 crore of net losses for the June quarter due to higher fuel cost, falling rupee and low fares, said it will monetise loyalty programme JetPrivilege and wet-lease some of its small aircraft to mobilise urgent working capital.

This is the second straight quarter of losses for the Naresh Goyal-run airline, which had last month publicly admitted to cash-flow issues. The airline had booked net profit of Rs 53.50 crore in the year-ago period, while in the March quarter it had reported net losses of Rs 1,036 crore.

The airline said it fuel cost soared 53 per cent to Rs 2,332 crore in the quarter, while low fares had revenue inching up to Rs 6,066 crore from Rs 5,953 crore.

On a consolidated basis, the net loss stood at Rs 1,326 crore, against a net profit of Rs 58 crore a year ago.

The second back-to-back quarterly loss forced Jet Airways, which delayed the result announcement on August 9 indefinitely, to announce a turnaround plan which, according to chairman Goyal, includes a capital infusion by selling a stake in JetPrivilege, and a massive cost cutting to save around Rs 2,000-crore over the next two years.

"The board today considered two significant proposals: infusion of capital and monetisation of the airlines' stake in the loyalty programme," Goyal said.

It can be noted that the airline owns 49.9 per cent in JetPrivilege and the rest is with its equity partner Etihad, which owns 24 per cent stake in the airline.

Goyal expressed the hope that these two measures "bode well for the long-term financial health and sustainability of the airline."

Cost cutting covers various areas of operations such as maintenance, sales and distribution costs, fuel bill, reducing debt to save on interest and enhancing manpower productivity with special focus on the crew, the airline said.

The board also approved the management plan to wet-lease some of its ATRs which are currently deployed on short-haul routes.

The airline was earlier scheduled to announce the June quarter numbers on August 9. But after the AGM and the board meeting, the airline informed that exchanges that the board did not consider the accounts as the company's audit committee was headless.

"The management wanted more time to look at the accounts and the board agreed to that" the airline told the exchanges, resulting in a slew of regulatory queries.

Reportedly private equity firm TPG Capital is looking to snap up a stake in JetPrivilege, and the airline has reportedly appointed Morgan Stanley to advise it on the deal.

Blaming the massive spike in operational cost to spiraling ATF prices, which jumped 53 per cent in the quarter, the airline noted that crude rose more than 36 per cent during the reporting period.

On top of it is the continuing depreciation of the rupee, which during the quarter lost around 6 per cent.

"This has resulted in a mismatch between high fuel prices and low fares, which primarily undermined our performance in the quarter," the airline said.

"We are implementing a host of measures to reduce cost and grow revenue, while retaining our focus on our guests, which will help in addressing the challenges faced by us. In fact, several such transformation initiatives have already started to deliver positive results," chief executive Vinay Dube said, adding the induction of fuel-efficient B737 Max will help us achieve the stated 8-10 per cent growth plan.

The airline plans to deliver 3-4 per cent growth in revenue per available seat-kilometer through tactical and strategic initiatives around network, pricing, inventory management and sales, he said.

Besides, the capital infusion and debt reduction is expected to result in significant lowering of interest cost, the airline said, adding it will wet lease excess ATR aircraft, which will result in further improvements to the bottom line.

Significantly, the airline is in talks with TruJet to wet lease up to seven of its 18 ATRs.

A wet-lease is an arrangement under which one airline provides an aircraft, its complete crew, maintenance and insurance.

The airline during the quarter flew four per cent more passengers to 7.38 million over the year-ago period besides registering a 9.4 per cent growth in available seat kilometers over the past 12 month’s period. It also saw a 7.6 increase in revenue passenger kilometres during the quarter.

After losing more than three-fourths of its value since July first week when Jet Airways had admitted to having flow issues, the airline counter today rose 2.16 per cent at Rs 281.80 on the BSE on a day when the benchmark Sensex soared 1.16 per cent.

Catch the Biggest Newsmakers and the Biggest Newsbreaks on CNN-News18, your favourite English TV news channel. Keep watching CNN-News18 at just 50 Paise per Month. Contact your cable /DTH operator Now!
*Rental / capacity fee of Rs.130/- as charged by cable / DTH operator may apply. **GST extra.

Read full article
Next Story
Next Story

Also Watch

Most Active
Company Price Change %Gain
Sun Pharma 430.50 2.76
Reliance 1,232.35 -0.23
Yes Bank 197.60 2.81
ICICI Prudentia 306.15 -11.26
ITC 283.10 -2.30
Company Price Change %Gain
Sun Pharma 430.80 3.05
Ratnamani Metal 855.00 -6.50
Yes Bank 197.70 2.92
Hathway Cable 31.55 2.60
Bombay Burmah 1,223.10 0.23
Top Gainers
Company Price Change %Gain
Yes Bank 197.60 2.81
Sun Pharma 430.65 2.79
Wipro 354.30 2.25
Zee Entertain 433.25 1.88
Tata Steel 464.10 1.65
Company Price Change %Gain
Sun Pharma 430.60 3.00
Yes Bank 197.70 2.92
Tata Steel 463.90 1.55
HUL 1,771.75 1.25
Bajaj Finance 2,638.50 0.84
Top Losers
Company Price Change %Gain
Grasim 783.50 -2.59
Indiabulls Hsg 780.70 -2.09
ITC 283.10 -2.30
Infosys 733.35 -1.61
TCS 1,874.50 -1.44
Company Price Change %Gain
ITC 283.15 -2.28
Infosys 733.10 -1.51
HDFC 1,958.25 -1.23
M&M 699.30 -1.24
NTPC 141.20 -1.12

Live TV

Countdown To Elections Results
  • 01 d
  • 12 h
  • 38 m
  • 09 s
To Assembly Elections 2018 Results