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Jet Airways India Ltd has posted a net loss from ordinary Activity After Tax of Rs (4066.90) mn for the quarter ended September 30, 2009 as compared to net loss of Rs (3845.30) mn for the quarter ended September 30, 2008. Total Income has decreased from Rs 32584.50 mn for the quarter ended September 30, 2008 to Rs 23809.70 mn for the quarter ended September 30, 2009.
Management Discussion and Analysis (for the quarter)
The domestic air traffic market has started to show some signs of recovery in the current quarter; however lean season and low yields have impacted the top line. Domestic industry traffic in Q2 grew by 24% over same period last year.
Capacity in the market is more or less stable now (Industry capacity only grew by 5%), however airlines continued to offer low fares in Q2 which has lead to a decline in average yields. This is lean season impact and typical of Q2 every year.
Coupled with this, we had increases in Fuel costs during this quarter. Fuel prices for the quarter increased by 17.4 % as compared to the April to June quarter and this led to an additional cost impact of INR 1,083 million (US$ 22.5 million).
Despite such difficult circumstances, the Company has achieved an EBITDAR margin of 10.6% in Q2 FY10 compared to -6.1% in Q2 FY09, which suggests that operationally the performance has stabilized and the impact of initiatives like rationalization of capacity and our cost reduction program have started to show results.
The Company has achieved a seat factor of 75% in the current quarter on “Jet Airways Konnect” (JAK), our single class no frills service introduced from May 2009.
As of date, 27 of our aircraft (17 B737 and 10 ATR aircraft) which represents close to 2/3rd of our capacity are being operated under Jet Airways Konnect brand.
Domestic operations accounted for 38% of total revenues (Rs. 9,134 mn US$ 189.9 mn) versus 46.8% (Rs. 15,243 mn, US$ 324.6) in the second quarter of the previous year.
The Company achieved a domestic seat factor of 69.8% in Q2 FY10 versus 66.9% in Q2 FY09.
During the quarter, our capacity increased by 2.5% as compared to Q1 FY10 because of more conversions from a full service offering to JAK. This number has been majorly impacted due to the 5 days of strike that we had in September. The full impact of the JAK conversions will show up in Q3 FY10.
The Company recorded a pre-tax loss on domestic operations of Rs.3,663 million (US$76.1 million) versus a loss of Rs. 2,886 mn (US$ 61.4 million) in the same period a year ago.
The revenues from our International operations now account for 62 % of total revenues (Rs. 14,676 million, US$ 305.1 million) versus 53% (Rs. 17,341 mn, US$ 369.2 mn) in the second quarter of last year.
The Company achieved a seat factor of 80.6% for Q2 FY10 versus 66.0% for Q2 FY09
The Company showed an improved performance in Q2 FY10 with a healthy EBITDAR margin of 25.2% vs -9.5% in Q2 FY09, suggesting a major turnaround.
Over the last few quarters, our seat factors on international routes have been consistently in the high 70s to low 80s.
Our international operations as a whole showed a pre-tax loss of INR 404 million (US$ 8.4 million) versus a pre tax loss of Rs. 2,899 million (US$ 61.7 million) for the same period last year. This still reflects sluggish demand, especially in the premium segment.
Achieved seat factor for UK & US routes are in 80s. ASEAN, Gulf and SAARC routes are in mid 70s thereby resulting into an overall seat factor of 80.6% for International operations.
This improvement in performance of international routes was due to capacity rationalisation & focusing on profit making routes.
As a part of our gradual expansion program on regional international routes we have launched Mumbai-Riyadh, Mumbai- Bangkok, Hyderabad -Dubai and Kochi-Sharjah routes with B737 aircraft.
We are evaluating to start flights from Bangkok to Gaya via Varanasi.
The results for the quarter were impacted by the 5 days of pilots’ strike (between September 8, 2009 and September 12, 2009) which resulted in close to 1,300 domestic flights and close to 200 international flights being cancelled. This resulted in an approximate loss of revenues of around Rs. 800 million (US$ 16 million) for the 5 day period.
Domestic air traffic appears to have started reviving in the last few months based on recent traffic data. This, along with the peak season impact in quarter 3, will help airlines to improve yields, which otherwise had been severely impacted due to the recession and lean season impact in Quarter 2.
Over the last few weeks, airlines have started raising fares and these increases have not shown any negative impact on traffic.
On the International routes, we were able to achieve seat factor of close to 80% and are close to breakeven despite difficult market conditions. We do expect yield improvements with the peak season as well as premium demand revival in the next few quarters whilst our focus will continue to be on maximizing revenues through higher seat factor levels.
Our “Jet Airways Konnect” no-frills all economy class service has helped us to improve seat factors and overall revenues in the domestic business and we are now in full fledged operations as per our original plan.
India Infoline Research Team / 14:59, May 20, 2015
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