The net loss in the three months through September was 13 billion rupees, compared with a profit of 496.3 million rupees a year ago
Mumbai: Jet Airways India Ltd. posted its third consecutive quarterly loss, as intense competition kept fares low amid rising oil prices.
The net loss in the three months through September was 13 billion rupees ($180 million), compared with a profit of 496.3 million rupees a year ago, the nation’s biggest full-service carrier said in a Monday statement.
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The loss at the full-service carrier is the latest sign that Indian airlines are struggling to survive in a market where competition has depressed fares and high fuel prices negate gains from a surge in demand for air travel. Local airlines would need to raise ticket prices by 12 percent to counter the blow from fuel costs and a weakening rupee, yet that would lead to a slump in passenger numbers, according to CRISIL, the Indian unit of S&P. The Mumbai-based carrier isn’t the only one in trouble. IndiGo, the low-cost operator, reported a quarterly loss for the first time as a publicly traded company for the three months through September. SpiceJet Ltd., a budget carrier, has said it’s seeking more time to pay for leased aircraft.
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Jet Airways’s fuel costs rose 58 percent to 24.2 billion rupees. The carrier, which hasn’t made a profit in nine of the past 11 fiscal years, has been seeking to raise funds to ease a crunch. Last month, it said it received notices from aircraft leasing companies about late payments or contract defaults. Jet Airways shares have slumped 71 percent this year, shrinking its market value to $377.5 million. Besides pledging to cut costs, the board in August proposed to pare debt and sell the carrier’s stake in JetPrivilege, a loyalty program. Abu Dhabi’s Etihad owns 24 percent of Jet Airways Two-Cent Fares Are Killing Airlines in India’s Cutthroat Market. – Bloomberg
Today’s Cut the Clutter deals with air safety. Sometimes wonder if cost pressures compel airlines to cut corners on safety.
The enduring solution would be for Jet to be acquired completely by a Gulf based carrier with very deep pockets, an entity which values the long term growth potential of the Indian civil aviation market. Shutting down Air India would be good for the economic health of the sector. With or without that development, the major airlines need to come to an understanding – given the fragile state of their finances it would not be an anti competitive or collusive act – that tickets need to be priced at or above cost, that growth will not be pursued with complete disregard to profitability.