India’s oldest private airline has finally delivered the bad news—and a way to fix things.
After delaying the announcement of its quarterly results for 18 days, Jet Airways on Aug. 27 said it had incurred losses of Rs1,323 crore ($189.2 million) in the April-June period, mainly due to sharply rising fuel prices and a weak rupee.
This is the second consecutive quarter that the company has reported losses for.
“The rise in the price of brent fuel, a depreciating rupee, and a resulting mismatch between high fuel prices and low fares have adversely impacted the Indian aviation industry, including Jet Airways,” said Vinay Dube, CEO of Jet Airways. The company’s fuel cost for the quarter rose 35% year-on-year to Rs2,332.49 crore.
Jet is not the only Indian airline badgered by macroeconomic factors.
Last month, IndiGo, India’s largest airline by market share, posted a 97% year-on-year decline in net profits for the June quarter as its fuel expenses rose by 54%. On Aug. 14, SpiceJet reported losses of Rs38.06 crore; its fuel costs had risen by 52%.
Jet is reportedly going through an acute cash crunch because of which promoter Naresh Goyal is believed to be in talks to sell a part of his stake.
However, the company has now put in place a turnaround strategy for itself.
“The board also considered various cost-cutting measures, debt reduction, and funding options, including an infusion of capital and monetisation of assets, including the company’s stake in its loyalty programme,” said an Aug. 27 press release from Jet.
Here are the key decisions:
The cost-cutting: The company plans to save Rs2,000 crore over the next two years by cutting corners on maintenance, selling and distribution, fuel rate optimisation, debt and interest as well as enhancement of crew, and manpower productivity.
Fuel-efficient flights: Jet Airways will induct fuel and cost-efficient B737 MAX aircraft.
Asset monetisation: It plans to sell assets like its JetPrivilege loyalty and rewards plan that has about 8.5 million members.
Non-fuel costs and revenue: The airline will reduce its non-fuel costs by up to 15% in the next eight and 10 quarters. It will also aim to deliver a 3-4% growth in revenue per available seat through tactical and strategic initiatives around pricing, network, and sales.