Occupancy to steer the course for aviation cos

Written by Shaheen Mansuri | Mumbai | Updated: Jul 20 2010, 04:37am hrs
Passenger occupancy figures, which saw an improvement in the later half of the April-June quarter, will be a key determinant of the aviation sectors performance this quarter, say analysts.

Jet Airways, with 26% market domestic market share, is expected to post a loss of Rs 17 crore, says an IDFC Securities report. The figure also includes a one-time hit of Rs 41.4 crore due volcanic ash in Iceland that led the airline to discontinue its flights in April to the US and the UK destinations for a couple of days. Jet has three daily flights to the UK and the US, respectively.

Arvind Mahajan, executive director, KPMG Advisory Services, says: The turnaround in the sector has happened against the backdrop of improved market conditions. Jet has shown operational efficiencies in terms of lowering its costs. Its international operations are doing well with excellent load factors.

Sudheer Raghavan, chief commercial officer at Jet had recently told Fe that of 85 daily international flights with 23 destinations in the international skies, seat factors in the US sector are above 80%, in the UK region it's close to 90%; in Asean and Gulf sectors its 78% and 73% receptively at Jet.

An analyst says: We estimate that Jet will post a net loss of around Rs 19 crore compared with net loss of Rs 225 crore, which it posted in the corresponding quarter, a year ago. Consolidated revenues will grow 11% to around Rs 3,077 crore from Rs 2,085 crore on the back of revival in air travel demand.

However, operating margins are expected to see a marginal decline of 3-5% from 16.5% due to a rise in fuel cost. He adds in the June quarter of the previous financial year, crude oil averaged at around $69 a barrel comparedwith $80 a barrel in the current years June quarter.

Jet's lower losses can be attributed to factors like its improved load factors of over 82% for the quarter under preview as against 73.4%, which it had registered last year.

Mahajan adds that Delhi-based low cost carrier SpiceJet is expected to post a net profit since there has been an increased preference of passengers towards low-fare travel.

An analyst added that SpiceJet will post a net profit of around Rs 30.7 crore as against Rs 26.3 crore which it posted in the same quarter, a year ago. Revenues are expected to grow 7%.