Jet Airways: Price war a hurdle, but passenger growth could help

After SpiceJet, which recorded a higher-than-expected net profit, it is the turn of the industry’s biggest player — Jet Airways — to spread cheer among industry watchers.
This turnaround on the net profit front has come about, thanks to the cost-cutting measures the airline resorted to rather than blooming passenger growth. Jet Airways India registered a positive net profit of Rs 105 crore in the third quarter this year compared with a loss of close to Rs 250 crore during the year-ago period.
The company slashed its total expenditure by more than 13% on a year-on-year basis. Two factors have contributed significantly to the pruning of expenses. First, the company cut its employees’ costs and other operating costs by more than 20% on a YoY basis.
Besides, the stabilisation of fuel prices ensured that its fuel costs remained rangebound . The results show that the company is now focused on improving its operational leverage — cost-cutting being one of them, rather than its earlier practice of focusing on maintaining its market share by all means.
But going forward, the company needs to focus on its low-cost carrier initiatives — Jet Konnect and JetLite — as both the industry and customers seem to be migrating to the low-cost model as evident from the 30% fall in Jet’s domestic revenues per route kilometre (RPKM) in Q3. However , Jetlite continues to lag behind its parent’s overall domestic operations in terms of growth and profitability .
The success of the low-cost carrier model is reflected in the impressive results reported by LCC player SpiceJet. The company clocked a surprising 36% growth in its total sales to Rs 653 crore and reported a positive net profit of Rs 108 crore in the third quarter.
26/01/10 Rajesh Naidu/Economic Times

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Categories: Jet Airways Jan 2010