News Analysis

Jet Airways FY19 results: Steep jump in losses reflects a foregone conclusion

Anand Kalyanaraman BL Research Bureau | Updated on July 29, 2020 Published on July 29, 2020

Jet Airways’ disastrous performance in FY2019 can be attributed to a sharp 14 per cent y-o-y jump in total expenses to ₹28,142 crore even as its revenue declined about 3 per cent y-o-y to ₹23,314 crore   -  REUTERS

The standalone loss of the airline during FY2019 shot up to ₹5,536 crore

Delayed by more than a year, the financial results of Jet Airways for FY2019 that were declared Tuesday midnight reflect a foregone conclusion. There was a steep worsening of losses in FY2019 at the beleaguered airline that shut down operations in April 2019 and is now winding its way through the corporate insolvency resolution process that was set into motion in June 2019.

The audited results of Jet Airways for FY2019 approved by the resolution professional — Ashish Chhawchharia — show that the standalone loss of the airline during FY2019 shot up to ₹5,536 crore from ₹768 crore in the prior year. This contributed to the standalone net worth of the airline deteriorating to a negative ₹12,695 crore as of March 2019 from a negative ₹7,242 crore as of March 2018.

The standalone total liabilities of Jet Airways, including borrowings and other financial liabilities, shot up to ₹23,809 crore as of March 2019 from ₹19,715 crore as of March 2018. In short, FY2019 saw a massive fall in the airline’s financial performance that prevented it servicing its burgeoning debt and liabilities, and precipitated its closure.

The resolution professional has said that he is not in a position to provide the consolidated financial results of the airline, as the five subsidiaries of the company are separate legal entities — also currently non-operational — and there is huge difficulty in obtaining relevant data from the subsidiaries. As of December 2018, Jet Airways’ consolidated net worth was a negative ₹10,370 crore. It is safe to presume that this, too, would have shot up further to about ₹12,700 crore by March 2019.

History of losses

For the nine months ended December 2018, Jet Airways had posted a standalone loss of ₹3,208 crore. Given that the full-year loss for FY2019 was ₹5,536 crore, this implies that the airline’s standalone loss in the March 2019 quarter was a whopping ₹2,328 crore, likely its highest ever. The full-year loss in FY2019 is the largest in the history of the airline, which has posted losses in 10 out of the 15 fiscal years since its listing in March 2005.

Jet Airways’ disastrous performance in FY2019 can be attributed to a sharp 14 per cent y-o-y jump in total expenses to ₹28,142 crore even as its revenue declined about 3 per cent y-o-y to ₹23,314 crore. The spike in expenses was driven primarily by higher fuel costs (up 25 per cent), finance cost (up 17 per cent) and other expenses such as non-claimable GST and forex loss (up 20 per cent in total). Besides, there was an exceptional cost with regard to the engine maintenance agreement.

Jet Airways did badly throughout FY2019, culminating in the record loss in the March 2019 quarter. With lessors grounding many of its planes in the March 2019 quarter for non-payment of dues, Jet’s fleet size diminished to nearly a third of what it was a year ago. As of March 2018, the airline had a total fleet of 120. By December 2018, Jet’s total fleet had reduced to 117, and by March 2019, when the crisis exploded, the airline was operating just about 35 aircraft, according to reports.

Jet’s passenger traffic and its market share also shrunk sharply in the March 2019 quarter when most of its planes got grounded and flights were cancelled left, right and centre. Promoter Naresh Goyal had to eventually resign from the Board in the March 2019 quarter due to pressure from lender-banks. Jet Airways’ loss was a gain for its rivals, with IndiGo’s profit jumping five-fold and that of SpiceJet rising 22 per cent y-o-y in the March 2019 quarter.

The promoter holding in the company, which was 51 per cent as of March 2019, fell to about 25 per cent as of June 2019, with lender Punjab National Bank (PNB) invoking the pledge on 26 per cent stake pledged by Goyal.

As part of the corporate insolvency resolution process, claims worth ₹36,821 crore have been received from creditors, while claims worth ₹15,664 crore have been admitted so far. This could change pending the final outcome of the process.

Following the results declaration, the already battered Jet Airways stock hit lower circuit, losing about 5 per cent in Wednesday's trade.

 

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Published on July 29, 2020
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