Jet Airways may incur losses for FY?08

The company on Thursday said it was postponing the results announcement since the audit of its results will not be completed before a board meeting on Friday due to “unforeseen circumstances”, but sources say the company could be pondering over losses incurred during the fiscal, owing to losses on international routes and derivatives, high fuel costs and rising staff salaries.

KG Vishwanath, senior general manager-MIS and investor relations at Jet told FE , “We had a routine meeting on Friday and the board will meet in the second or third week of June to take stock of the financial results.”

The Jet Airways stock was down 3% to close at Rs 526.75 on the BSE on Friday.

Airline experts are of the view that Jet will report losses owing to multiple factors that have been dogging the airline. “The airline has started adding new international destinations since a year. It will have to incur start-up losses before it starts making profits after a couple of years on the international network.” said an analyst who did not wish to be named, adding that murmurs that senior executives, including executive director Saroj K Datta, were exiting the company had also affected it.

Airlines in general are facing rough weather on account of a host of factors. Crude oil prices have reached a record high, from $100 a barrel to over $130 a barrel since April 2007. Crude prices stood at $138 a barrel on Friday.

“Owing to the escalating jet fuel prices, the operating cost of the airline has increased multi-fold compared to last year, since jet fuel constitutes 45% of the operating cost of any airline. The bigger the aircraft, the higher the fuel burn, leading to a sharp increase in operating costs for the players,” said the analyst, adding that even the salary structure for staff has also shot up over 30% since 2004.

The surge in operating and employee salaries and soaring inflation has hit the airline badly.

Jet and other airlines in India pay very high airport charges as compared to airlines across the globe. The airline, during the year, was not able to stabilise its operating costs but continued extending its capacity. Also, the airline is in the fleet enhancing mode which entails huge capital costs.

“The balance-sheet of the airline is generally asset heavy and highly leveraged. This offers little financial flexibility in case of a downturn,” said the source.

To bring about a change in its fortunes, Jet needs to develop other income business models like non-airline related business, according to experts. The airline should also take a hard look at their routes and fuel strategy and focus on improving yields.