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Jet Airways on Friday denied reports of a stake sale and put to rest questions raised on its ability to keep the airline operational.
The airline’s CEO Vinay Dube said: “Jet Airways (India) would like to clarify that recent media reports about the sustainability of the airline are not only factually incorrect, but also malicious. The airline would also like to deny any conjecture of a stake sale.”
Media reports had said the airline may have to stop operations if it is not able to carry out the ongoing cost cutting measures within 60 days. They also said it has approached bankers to revive stake sale talks.
Jet, which is suffering heavy losses due to an increase in aviation turbine fuel prices, a depreciating rupee and mounting debts, had asked its staff to take a pay cut of up to 25 per cent. The management met with pilots and other staff members in Mumbai and Delhi, where it talked about the tough times the industry in general and the airline in particular are going through.
Pilots claim they have been asked to take a 15 per cent cut in their salaries. The airline currently has about 16,000 employees and a fleet of 121 aircraft.
Jet had a gross debt of ₹8,424 crore as of March 31, which analysts predict would’ve grown by now.
Dollar debt
Much of the debt is in dollars, which means a weaker rupee will require Jet to pay more. The company reported an over ₹1,000-crore loss in the March quarter.
Industry watchers point out that with oil prices near record highs, which were last seen in 2014, and last-minute average fares at almost half of what they were at that time, airlines will have to look at various methods of curtailing their costs for staying afloat.
Last-minute fares
“Oil prices for the last quarter on an average were around $74 a barrel, while the rupee depreciated to ₹67 against the US dollar,” said Madhukar Ladha, Aviation Analyst, HDFC Securities. “In rupee terms, the fuel costs went up significantly. On the revenue side, the market saw excessive price competition in the 0-15 days price window. This impacted first quarter 2019 yields for IndiGo. We are awaiting SpiceJet and Jet Airways’ results.”
IndiGo, which declared its first quarter results last week, saw a 97 per cent drop in its net profits. The airline blamed it on the adverse impact of foreign exchange, high fuel prices and the competitive fare environment. IndiGo officials said as much as 40 per cent of their bookings were in the 0-15 day window.
The Centre for Asia Pacific Aviation has predicted that around 100 aircraft will be delivered to Indian carriers each year for the next five years. This will heighten the competition among them.
While many feel that there is need for domestic air fares to move northward — some say a correction of as much of 20-30 per cent is required — the fact that every airline has a different cost base makes it difficult to say exactly how much the fares should be hiked.
Cost bases
Airlines have different costs bases because some of them operate a single aircraft fleet while others have two or more aircraft fleet and thus higher cost bases. Jet Airways has a mixed fleet which includes Airbus A-330, ATR 72, Boeing 737 and Boeing 777.
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