Monday, August 06, 2018

Crisis at Jet Airways was brewing for some time

Naresh Goyal promoted Jet Airways has been losing market share to its peers in the past several quarters, as the latest figures available with regulatory body Directorate General of Civil Aviation, indicating that it reduced to 15.4% in the domestic market by the end of 2017, from 15.6% at the beginning of the year. At 13.9% in June, the drop in the market share has been more severe this year,.
The airline's shares plunged around 7% since mid last week after reports came out about airline making salary cuts up to 15% for its employees, including expats pilots.
As per the analyst meet records, an analyst with a global investment service, referring to the salary cut asked the airline management as to what steps have been taken to reduce the cost on manpower side.
A question regarding salary cuts was raised during the management's call with analysts on May 24 after the loss ridden fourth quarter financial results, but it refused to provide a specific reply, and instead claimed that they had managed to contain the manpower costs by improving productivity.
The analysts' concerns stemmed from the fact that a day earlier, on May 23, Jet Airways had reported a net loss of Rs 1,040 crore for the fourth quarter in comparison to the Rs 583 crore profit in Q4 FY17. Like its rivals, Jet Airways too blamed the rising fuel price, as it constitutes around 45-50% of the total operational expenditure of the carrier for its precarious finances, apart from other factors like foreign exchange impact and one-time increase in maintenance cost of some of its aircraft.
06/08/18 Shahkar Abidi/DNA