Date:18/10/2006 URL: http://www.thehindubusinessline.com/2006/10/18/stories/2006101802680100.htm

Jet Airways posts Rs 55.1-cr loss in Q2

Our Bureau

Higher operating costs, fuel prices

Mumbai Oct. 17

Rising fuel and other operating costs, coupled with an unprecedented capacity expansion in the domestic market, have sent Jet Airways financials into a tailspin.

The airline has posted a net loss of Rs 55.1 crore for the second quarter of the current fiscal compared with a net profit of Rs 68.6 crore posted during the corresponding quarter of the previous fiscal.

For the half-year period ended September 30, 2006, the airline's net loss was Rs 100.1 crore compared with a net profit of Rs 163.9 crore in the first half of the previous fiscal. Industry analysts say the airline industry as a whole would continue to tote up losses, which may cumulatively touch about Rs 2,200 crore in the current fiscal.

Even while fuel prices were moving up, Jet Airways cut ticket prices to compete with low-cost airlines, straining its operating margins. The airline reported that fuel costs were higher by Rs 172.6 crore during the quarter, as compared to the prices that ruled in the corresponding quarter of the previous fiscal. This included an impact of about Rs 27 crore on congestion-related delays at major ports such as Mumbai and Delhi. "Fuel surcharges did not help us recover the additional impact from higher fuel prices in the quarter," the company said.

Continued expansion of industry capacity was also seen pushing the airline into the red. About 1.40 lakh seats per day were offered by the airline industry in September 2006, as compared to 1.28 lakh per day in April 2006 and 80,000 per day in January 2005.

"Some of the airlines are offering seats at prices that do not even cover the cost of operations. The situation is likely to worsen with five to six new airlines planning to commence operations in the near future," an analyst said.

The company has initiated a turnaround programme by reducing the effective aircraft weight to conserve fuel use.