Thursday, September 14, 2017

Jet Airways hit by dip in foreign route revenues; here is why alarm bells are ringing

New Delhi: 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.
14/07/17 Mayaben Ghosh/Financial Express