India’s biggest full-service airline, Jet Airways Ltd, posted its second consecutive quarterly loss on Monday, and said it would inject funds and cut costs in excess of 20 billion rupees in two years as it seeks to turnaround the business.
The airline, part-owned by Etihad Airways, has been facing financial difficulties but has said it is confident it can cut costs and keep flying, dismissing reports that it had told staff it was running out of cash.
India is the world’s fastest-growing aviation market, but rising fuel prices, a weaker rupee and price competition has pulled down airline profitability. InterGlobe Aviation Ltd, operator of the country’s leading carrier IndiGo, reported a 97 per cent plunge in profit last month.
Jet posted a loss of 13.23 billion Indian rupees (USD 188.76 million) for the three months ended June 30, compared with a profit of 535 million rupees a year earlier, despite a 5.2 per cent jump in its revenue.
Depreciating rupee and an about 36 per cent rise in global oil prices dented the company’s profitability, it said in the statement. The struggling airline will inject capital and reduce debt to cut its interest costs, the statement said, without elaborating on the size of the funds’ injection.
It also plans to monetise some of its assets, including the JetPrivilege programme, which has 8.5 million members. “The two significant proposals ... infusion of capital and the monetization of the airline’s stake in its Loyalty programme bode well for the long term financial health and sustainability of the airline,” said Jet Airways Chairman Naresh Goyal.
The company aims to introduce fuel and cost-efficient B737 MAX aircraft to aid its 8-10 percent growth plan and simplify its fleet by sub-leasing excess ATR aircraft to improve its profitability. Jet, which cut its non-fuel expenditure by 1.5 per cent in the June quarter, plans to further reduce such costs by 12-15 per cent in the next 8-10 quarters, it said.
Earlier this month Jet postponed its earnings announcement, after which its shares sank to a three-year low amid concerns over the airline’s financial health.