Jet Airways — the country’s largest full-service carrier — may have reported a substantial jump in net profit during the first quarter of the current fiscal, but the continuous decline in revenues from the international segment is a cause of concern for the airline and will impact the carrier’s profitability down the line.
Jet Airways — the country’s largest full-service carrier — may have reported a substantial jump in net profit during the first quarter of the current fiscal, but the continuous decline in revenues from the international segment is a cause of concern for the airline and will impact the carrier’s profitability down the line. As a result of the slowdown in the Gulf economies, the contribution of international revenues to the overall top line in the first quarter declined to 54.35%, compared with 58% in the corresponding period in FY17. The segment contribution decreased by 80 basis points to 57.5% during FY17 from 58.3% in the FY16.
For network carriers like Jet Airways and Air India, international revenues contribute 55-60% of the revenues. Hence, it is imperative for the airlines to increase revenues from the international segment.
Revenues from the international segment during the quarter increased by merely 2% year-on-year to Rs 3,070.25 crore while domestic revenues increased by 20.9% y-o-y to Rs 2,578.62 crore despite intense competition from local carriers.
The passenger load factor on the international network also decreased to 80% in the first quarter compared with 81.8% in the year-ago period. In order to compensate for the loss in traffic to the Gulf countries, the airline is focusing on the European routes where it can utilise its code-share agreements with KLM Royal Dutch Airlines, Delta Air Lines and Air France.
“The demand on the Gulf routes have been weaker and it has impacted the yields as well. We have also not been able to pass on the increase in the oil prices to the customers. Going forward, we will focus on the European network and will also launch new flights there,” said JetAirways chief financial officer Amit Agarwal in a conference call with analysts.
The Mumbai-based airline also announced that it will induct eight Boeing 737 Max aircraft on lease starting June next year. It will also launch new flights on non-Gulf routes, like Mumbai to London, Bengaluru to Amsterdam, and Chennai to Paris in the near future.
“Jet Airways has to look at the European sector since the political turmoil and economic slowdown in the Gulf countries will continue to deter people from travelling there. In order to better utilise their code share with European and American airlines, Jet had to shift focus to Europe from the Gulf, though a substantial portion of the capacity is deployed in the Gulf sector,” said an analyst with a foreign brokerage agency.