Lower yields and lean season impact Jet Airways results

The domestic air traffic market has started to show some signs of recovery in the current quarter; however lean season and low yields have impacted the top line. Domestic industry traffic in Q2 grew by 24% over same period last year.
Capacity in the market is more or less stable now (Industry capacity only grew by 5%), however airlines continued to offer low fares in Q2 which has lead to a decline in average yields. This is lean season impact and typical of Q2 every year.
Coupled with this, there was increases in Fuel costs during this quarter. Fuel prices for the quarter increased by 17.4 % as compared to the April to June quarter and this led to an additional cost impact of INR 1,083 million (US$ 22.5 million).
Despite such difficult circumstances, the Company has achieved an EBITDAR margin of 10.6% in Q2 FY10 compared to -6.1% in Q2 FY09, which suggests that operationally the performance has stabilized and the impact of initiatives like rationalization of capacity and our cost reduction program have started to show results.
The Company has achieved a seat factor of 75% in the current quarter on “Jet Airways Konnect” (JAK), our single class no frills service introduced from May 2009.
As of date, 27 of our aircraft (17 B737 and 10 ATR aircraft) which represents close to 2/3rd of our capacity are being operated under Jet Airways Konnect brand.

Domestic operations
Domestic operations accounted for 38% of total revenues (Rs. 9,134 million US$ 189.9 million) versus 46.8% (Rs. 15,243 million, US$ 324.6) in the second quarter of the previous year.
The Company achieved a domestic seat factor of 69.8% in Q2 FY10 versus 66.9% in Q2 FY09.
During the quarter, our capacity increased by 2.5% as compared to Q1 FY10 because of more conversions from a full service offering to JAK. This number has been majorly impacted due to the 5 days of strike that we had in September. The full impact of the JAK conversions will show up in Q3 FY10.
The Company recorded a pre-tax loss on domestic operations of Rs.3,663 million (US$76.1 million) versus a loss of Rs. 2,886 million (US$ 61.4 million) in the same period a year ago.

International operations
The revenues from our International operations now account for 62 % of total revenues (Rs. 14,676 million, US$ 305.1 million) versus 53% (Rs. 17,341 million, US$ 369.2 million) in the second quarter of last year.
The Company achieved a seat factor of 80.6% for Q2 FY10 versus 66.0% for Q2 FY09
The Company showed an improved performance in Q2 FY10 with a healthy EBITDAR margin of 25.2% vs -9.5% in Q2 FY09, suggesting a major turnaround.
Over the last few quarters, our seat factors on international routes have been consistently in the high 70s to low 80s.
International operations as a whole showed a pre-tax loss of INR 404 million (US$ 8.4 million) versus a pre tax loss of Rs. 2,899 million (US$ 61.7 million) for the same period last year. This still reflects sluggish demand, especially in the premium segment.
Achieved seat factor for UK & US routes are in 80s. ASEAN, Gulf and SAARC routes are in mid 70s thereby resulting into an overall seat factor of 80.6% for International operations.
This improvement in performance of international routes was due to capacity rationalisation & focusing on profit making routes.
As a part of our gradual expansion program on regional international routes we have launched Mumbai-Riyadh, Mumbai- Bangkok, Hyderabad -Dubai and Kochi-Sharjah routes with B737 aircraft.
The airline is evaluating to start flights from Bangkok to Gaya via Varanasi.

Exceptionals
The results for the quarter were impacted by the 5 days of pilots’ strike (between September 8, 2009 and September 12, 2009) which resulted in close to 1,300 domestic flights and close to 200 international flights being cancelled. This resulted in an approximate loss of revenues of around Rs. 800 million (US$ 16 million) for the 5 day period.

Outlook
Domestic air traffic appears to have started reviving in the last few months based on recent traffic data. This, along with the peak season impact in quarter 3, will help airlines to improve yields, which otherwise had been severely impacted due to the recession and lean season impact in Quarter 2.
Over the last few weeks, airlines have started raising fares and these increases have not shown any negative impact on traffic.
On the International routes, we were able to achieve seat factor of close to 80% and are close to breakeven despite difficult market conditions. We do expect yield improvements with the peak season as well as premium demand revival in the next few quarters whilst our focus will continue to be on maximizing revenues through higher seat factor levels.
Our “Jet Airways Konnect” no-frills all economy class service has helped us to improve seat factors and overall revenues in the domestic business and we are now in full fledged operations as per our original plan.

Financial results of JetLite for the Q2
Achieved Revenues of Rs. 3,045 million (US$ 63.3 million) vs. 4,294 million (US$ 91.4) for Q2 FY 2009.
Achieved seat factor of 71.8% in Q2 FY10 versus 61.2% for Q2 FY09.
EBITDAR of Rs. -350 million (US$ -7.3 million) in Q2 FY10 versus Rs. -1,827 million (US$ 38.9 million) in Q2 FY09
EBITDAR Margin at -11.6% in Q2 FY10 versus -43.0% in Q2 FY09
Loss after tax of Rs. 1,261 million (US$ 26.2 million) v/s loss of Rs. 2,730 million (US$ 58.1 million) for Q2 FY’09
Exchange rate used 1 USD = INR 48.105 for current quarter and 1 USD = INR 46.965 for previous year same quarter
Lean season and lower yields have affected JetLite results for the quarter.
The overall seat factors have been 71.8% which has resulted in EBITDAR margins of -11.6% versus - 43.0% for the same period last year.
28/10/09 PRESS RELEASE/Jet Airways

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Categories: Jet Airways Oct 2009