Jet Airways reports improvement in operating metrics; High fuel prices and challenging fare environment impact financial performance

Jet Airways Group reported its results for FY18 and for Q4 FY18 ending March 31, 2018. For the full year, the Company reported an EBITDAR of INR 3,148 crores versus an EBITDAR of INR 4,477 crores in FY17. The Company reported a net loss of INR 636 crores for FY18 versus a profit of INR 1,499 crores in FY17 which would have been INR 438 crores in FY17 without the IND AS adjustment aggregating to INR 1061 crores.

For the quarter, Jet Airways reported an EBITDAR of INR 142 crores versus an EBITDAR of INR 934 crores in Q4 FY17. The Company reported a net loss of INR 1,040 crores in Q4 FY18 versus a profit of INR 583 crores in Q4 FY17 which would have been INR 23 crores in Q4 FY17 without the IND AS adjustment aggregating to INR 560 crores. The adverse impact on financial metrics for this quarter is largely attributable to the following factors:

Year-on-Year impact of increase in fuel prices of INR 366 crores;

Mark-to-market adjustment due to weaker Rupee of INR 156 crores in Q4 FY18 vs INR 54 crores gain in Q4 FY17; and

One-time maintenance charge of INR 253 crores

Despite these challenges, in Q4 FY18 Jet Airways increased its capacity by over 10%, increased passenger load factor by 3.9% points, reported a positive year-over-year passenger and cargo RASK, reduced net debt (excluding debt taken for BKC property) by INR 359 crores and achieved a year-over-year reduction in non-fuel CASK of 1.1%. Each of these metrics showcase Jet’s commitment to its transformation plan despite financial pressure arising from the lag between the increase in crude oil prices and air fares. Over the last two years, air fares have remained flat while fuel prices have doubled.

During the quarter, as part of its strategy to deepen domestic connectivity, the airline re-designed its network and announced several new services from its twin hubs at Mumbai and Delhi to the North East, with Guwahati as its North East gateway. The airline’s third hub – Bengaluru was also connected with emerging cities such as Patna, Pune and Amritsar, as part of its summer schedule.

On the international front, Jet Airways continued to seamlessly connect India with the Middle East, Europe and North America by continuing its productive partnership with Etihad Airways while expanding its codeshare cooperation with Air France – KLM Royal Dutch Airlines and Virgin Atlantic. Revenues from codeshare traffic for Q4 FY18 rose by 43.11%.

Jet Airways also placed an order for 75 additional fuel-efficient B737 MAX aircraft taking its overall order to 150 new aircraft, which will allow it to both replace as well as expand its fleet and network footprint.

During the year, Jet Airways continued to expand as well as deepen its cooperation with key partners, introducing non-stop services to Amsterdam, Paris Charles de Gaulle and London Heathrow from Bengaluru, Chennai and Mumbai respectively, which have started delivering tangible results.

Despite the challenges imposed by the Macroeconomic environment, Jet Airways is on track to deliver a more resilient enterprise on the back of certain key initiatives that include achieving a reduction in non-fuel CASK by 12%-15% through a reduction in maintenance costs, lowering cost of sales, increasing productivity, and fuel savings driven by the fuel efficient B737 MAX aircraft. The introduction of the MAX and the refurbished interiors of B777s will further help the carrier to rejuvenate its onboard experience.

The carrier is focused on reducing its sub-fleet complexity and adopt a host of measures including analytics to drive revenue growth in addition to leverage the strength of its industry leading JetPrivilege loyalty and rewards programme whose base expanded by more than 30% to nearly 8 million members during the year.

Vinay Dube, CEO, Jet Airways said, "Financial performance during the quarter was weaker due to the continuing increase in the price of Brent fuel without a corresponding increase in air fares, as well as mark-to-market adjustments due to a weaker rupee."

"The challenges notwithstanding, we are resolutely focused on undertaking numerous steps to create a heathier business by maintaining a relentless focus on lowering costs, increasing operational reliability as well as rejuvenating the customer experience, as part of our ongoing transformation."

An Etihad Aviation Group spokesperson said, "We remain confident of the future opportunities of the Indian aviation market and remain committed to our strategic partner Jet Airways."

Jet Airways Group FY18 highlights

Total revenue up 8% at INR 24,511 crores compared to INR 22,693 crores in FY17

Available Seat Kilometers increased by 8.9% to 58.2 billion over FY17

Passengers carried and Load Factor (PLF) increased by 10.3% to 29.95m and by 2.3 points to 83.6% in FY17 respectively

Increase in overall fleet utilization as well as B737 utilization to 12.78 hrs/day and 13.52 hrs/day respectively, over FY17

Interline and Codeshare traffic increased by 3.08% from 2.26m guests in FY17 to 2.33m in FY18

Cargo revenue grew by 31.2% to 1845 crores over FY17

Non-fuel CASK reduced by 1.8% to INR 3.12 from INR 3.18 in FY17

Jet Airways Group Q4, FY18 highlights

Total revenue up 8.2% at INR 6,196 crores compared to INR 5,728 crores in Q4, FY17

Available Seat Kilometers up 10.1% at 15.02 billion over Q4, FY17

Passengers carried increased by 11.8% to 7.85m over Q4, FY17

Interline and Codeshare traffic increased by 9.85% to 0.6m guests over Q4, FY17

Cargo revenue up by 16.9% to 451 crores over Q4, FY17

Non-fuel CASK reduced by 1.1% to 3.17 over Q4, FY17