INCREASED NET PROFIT FOR JET AIRWAYS

Dino D'Amore
By Dino D'Amore February 3, 2011 12:19

INCREASED NET PROFIT FOR JET AIRWAYS

Jet Airways (India) Ltd, India’s largest airline by passengers carried, reported an 11.7% increase in net profit for Q3, traditionally a peak season for Indian domestic airlines. Jet Airways reported a net profit of Rs.118.23 crore on a 19.9% increase in sales to Rs.3,474.62 crore for the quarter, On the back of a 19% increase in traffic. Meanwhile Jet’s low-fare subsidiary JetLite (India) Ltd reported a net profit of Rs.25.6 crore for the fourth quarter, as sales increased 16.1% to Rs.483.3 crore.

Jet required an average seat occupancy ratio of 74% during Q3 to break even. It achieved 79.3%. In doing so the airline posted revenue of Rs.3.92 per paying passenger kilometre during the quarter, up 7.4%. higher jet fuel prices sent the cost per average seat kilometre up 2.1%. The airline said it had lowered its debt 5.2% to Rs.13,031.8 crore at the turn of the year.

Jet’s focused approach of innovative marketing, strategic code shares and a growing network has helped it stay ahead of competition, said Nikos Kardassis, its chief executive.

So, Jet has done well in its third quarter, but this period is traditionally a strong one for airlines in India. Jet deserves credit for being the only airline that could manage a 16% increase in yields compared to the second quarter of the current fiscal year and 7.4% increase on the corresponding quarter a year ago. Jet managed to pass on the incremental expenses to passengers without compromising growth during the third quarter. Even so Jet has performed fairly in line with estimates barring provisions of interest cost of nearly Rs.100 crore and Rs.24 crore in mark-to-market losses.

Jet is the best of an uncertain bunch. The airlines in India, at the turn of the year, entered a no go area of increased capacity, forced lower air fares and increased fuel costs, now we understand that state-owned oil firms on Monday hiked jet fuel prices by 4.5%, the biggest increase in almost a year. On the back of this information, and given that Q4 is on the whole a weak one for airlines in India we should worry.

You would do well to book mark this story and then compare it with the Q4 results as they are announced in a few months, then you will see the full extent of the government inspired fare decreases and fuel increases. Jet can take it, but for how long?

Shares of Jet Airways dropped 1.64% to close at Rs.503.15 apiece on yesterday on the Bombay Stock Exchange, even as the bourse’s benchmark index, Sensex, gained 0.38% to end at 18,090.62 points.

Dino D'Amore
By Dino D'Amore February 3, 2011 12:19
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