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Jet Airways falls deeply into the red in 2QFY2012 but efforts in place to improve financial position

Jet Airways Group, India's largest airline group by market share, swung to an expected net loss in the traditionally weak second quarter (2QFY2012, three months ended 30-Sep-2011) compared with a profit a year ago, hurt by rising fuel prices, a tough pricing environment and large forex losses in the quarter, despite strong passenger and revenue growth. Yield weakness was a concern for Jet Airways, like its peers in the quarter, with Jet Airways senior VP finance, M Shivkumar, noting Air India has been compounding a price war that has caused industry-wide losses and weakened yields. 

"Air India is discounting fares and that’s absolutely a problem. Ideally, fares should go up when oil-import costs go up. That’s not happening and that’s why airlines are in this situation," Mr Shivkumar said, as quoted by Bloomberg. CCO Sudheer Raghavan, however, noted that it is seeing “significant” yield improvements in Nov-2011, with fare increases of 18-20% in recent weeks, amid capacity cutbacks by Kingfisher Airlines over the peak travel period in India. "We feel that there will not be any undue pressure on the yields in the coming months," Mr Raghavan said.

IndiGo is largest domestic carrier in India, one of the world’s fastest growth aviation market

IndiGo was the largest single carrier in the Indian domestic market in Oct-2011, ahead of Jet Airways, with struggling Kingfisher Airlines falling to third place. SpiceJet emerged as the fastest growing carrier in the month, while Kingfisher was the slowest growing carrier in the market. With up to 55 daily service cancellations this month, Kingfisher will likely continue to see passenger number and market share losses in the coming months. This could result in slowing growth in Nov-2011 and Dec-2011.

India is currently the fastest growing domestic market in the world after Chile, with growth expected to continue despite the current financial challenges experienced by key players in the Indian aviation market. India’s domestic air travel market continued to show impressive growth in the first 10 months of 2011, with passenger numbers increasing 18.3% to 49.6 million passengers, averaging out at 4.96 million passengers per month.

Jet Airways increasing low-fare capacity in reaction to industry trends

Jet Airways plans to increase domestic and short-haul international low-fare capacity in response to rising LCC competition in the Indian market. The move will entail a change in its current business model to be “in sync with market realities.” However, concerns centre on the potential pressure on earnings the shift in strategy could entail.

Jet Airways slips to quarterly net loss. Expects ‘tough’ second quarter

Jet Airways swung to a quarterly net loss in the peak 1QFY2012 (three months to Jun-2011) as rising fuel costs and intense competition in the domestic market offset an increase in passenger demand. The nation’s other listed carriers, SpiceJet and Kingfisher, are also expected to post losses in the quarter.