Airlines to post nearly Rs 500 cr losses in Q2

Written by Shaheen Mansuri | Mumbai, Oct 10 | Updated: Oct 11 2008, 08:00am hrs
The aviation sector is likely to post collective losses of around Rs 500 crore for the July-September financial quarter on account of softening yields per passenger and record fuel prices in the initial days of the quarter, say analysts. Losses for individual airlines in the comparable period last year were Rs 37.8 crore for low cost carrier SpiceJet, Rs 253 crore for Simplifly Deccan (erstwhile Air Deccan) and Jet Airways posted marginal profit of Rs 28 crore. It is estimated that the sector will collectively post losses of Rs 4,000 crore in the 2008-09 fiscal.

The second quarter financial results (its Q1 for Deccan) are likely to be adversely hit due to the air travel dipping drastically by almost 30% due to higher fares in accordance with the high crude oil prices. Aircraft movement at all metro airports has dipped including that of Mumbai and Delhi.

Citing various reasons for the poor performance of the sector, analysts say that domestic travel has dropped drastically as middle level officials at corporate houses and even leisure travelers are forced to cut down on air travel. Due to the global financial crisis, outbound business travel has dipped on almost all the international destinations, said an analyst.

Naresh Goyal, chairman, Jet Airways, while addressing shareholders at the companys AGM, had said that fuel is the most expensive component for Indian carriers as it is nearly 60% highly priced than its counterparts across the globe. Once there is a correction in the crude oil price and provided there is a uniform tax structure on importing aviation turbine fuel in India, the sectors financial health will improve, he said.

It may be noted that like other sectors, even the aviation industry is downsizing its staff to curtail their expenses. Airlines like state-owned Air India has even chalked out a 30-point strategy to contain their costs after having reported losses to the tune of over Rs 2,000 crore for the 2007-08 fiscal.

Experts say that investors have lost faith in the sector, after observing the performance in the previous and current fiscal.

Meanwhile, KG Vishwanath, senior manager-MIS and investor relations at Jet had recently told FE, Though aviation stocks are under-performing currently, investors should stay invested as the sectors will break even in the times ahead.