MUMBAI: The clear blue
skies may well be a mirage in the Indian aviation sector, even as two Indian
private airlines posted profit.
In uncharacteristic candour, Naresh Goyal, the founder and promoter of Jet Airways, which reported on Saturday a profit for the June quarter, after five gruelling quarters of losses, said high taxes and levies in the aviation sector are killing airlines in India and argued for a need to rationalise taxes for the sector to survive.
With rare candour, normally not associated with Jet's promoter when it comes to reacting on government policies and taxation issues, Goyal quipped: "Aviation should not be treated as luxury, it is essential for the economic growth of the country."
On Saturday, Jet had reported an impressive growth in revenues - up 31.5 per cent from the same quarter last year on a standalone basis - which it attributed to the prevailing "sanity in the market" for the past six months as competitors stopped undercutting peers and selling tickets below cost price.
Jet reported a profit of Rs 24.7 crore for the June quarter, a huge improvement from the Rs 298.12-crore loss it posted for the preceding March quarter. Jet had reported a Rs 123.2-crore loss in the quarter ended June 2011. To be sure, the profit accrued from exceptional items such as sale and leaseback of aircraft that amounted to Rs 52.4 crore and unamortised portion of foreign exchange losses of Rs 288.7 crore. Earlier, SpiceJet, India's third largest in terms of market share, had reported a net profit of Rs 56.2 crore.
Analysts such as Arun Kejriwal, CEO, KRIS Research, were however not impressed by the turnaround of SpiceJet and Jet Airways. "They are trying to ride the sentiments which is currently prevailing in the sector - that there is a turnaround with one competitor (read Kingfisher) in the intensive care unit. All other numbers do not give comfort and until a dramatic fall in operating costs happen, the future (for airlines in India) continues to remain uncertain."
Goyal, a self-made entrepreneur who started his career with a travel agency before launching Jet Airways in 1993, is acutely aware of the challenges facing the industry.
"Tomorrow, there is a possibility some other player might lower fares," said the baron of India's largest airline by market share. Domestic airlines are sitting on a cumulative loss of Rs 12,000 crore.
Goyal bemoaned the high operating costs for airlines here, saying they threaten the survival of the industry. Exorbitant fuel prices coupled with high fuel taxes comprise 50 per cent of its operating cost whereas, "it is 35 per cent for international airlines," he pointed out. Exacerbating the situation further is the lack of pricing power.
In uncharacteristic candour, Naresh Goyal, the founder and promoter of Jet Airways, which reported on Saturday a profit for the June quarter, after five gruelling quarters of losses, said high taxes and levies in the aviation sector are killing airlines in India and argued for a need to rationalise taxes for the sector to survive.
With rare candour, normally not associated with Jet's promoter when it comes to reacting on government policies and taxation issues, Goyal quipped: "Aviation should not be treated as luxury, it is essential for the economic growth of the country."
On Saturday, Jet had reported an impressive growth in revenues - up 31.5 per cent from the same quarter last year on a standalone basis - which it attributed to the prevailing "sanity in the market" for the past six months as competitors stopped undercutting peers and selling tickets below cost price.
Jet reported a profit of Rs 24.7 crore for the June quarter, a huge improvement from the Rs 298.12-crore loss it posted for the preceding March quarter. Jet had reported a Rs 123.2-crore loss in the quarter ended June 2011. To be sure, the profit accrued from exceptional items such as sale and leaseback of aircraft that amounted to Rs 52.4 crore and unamortised portion of foreign exchange losses of Rs 288.7 crore. Earlier, SpiceJet, India's third largest in terms of market share, had reported a net profit of Rs 56.2 crore.
Analysts such as Arun Kejriwal, CEO, KRIS Research, were however not impressed by the turnaround of SpiceJet and Jet Airways. "They are trying to ride the sentiments which is currently prevailing in the sector - that there is a turnaround with one competitor (read Kingfisher) in the intensive care unit. All other numbers do not give comfort and until a dramatic fall in operating costs happen, the future (for airlines in India) continues to remain uncertain."
Goyal, a self-made entrepreneur who started his career with a travel agency before launching Jet Airways in 1993, is acutely aware of the challenges facing the industry.
"Tomorrow, there is a possibility some other player might lower fares," said the baron of India's largest airline by market share. Domestic airlines are sitting on a cumulative loss of Rs 12,000 crore.
Goyal bemoaned the high operating costs for airlines here, saying they threaten the survival of the industry. Exorbitant fuel prices coupled with high fuel taxes comprise 50 per cent of its operating cost whereas, "it is 35 per cent for international airlines," he pointed out. Exacerbating the situation further is the lack of pricing power.
BSE
378.00
3.95(1.06%)
Vol:40413
shares traded
NSE
378.80
4.50(1.20%)
Vol:318036
shares traded
Tickets in China are
87% higher than India. Airfares in Australia are 182% higher than India’s
domestic fares and in the US they are priced 119% more than India. - Naresh
Goyal; Founder, Jet Airways
Goyal claimed that by international yardstick ticket prices in India are either one-third or half the price they are sold internationally. Reeling out statistics of ticket fares in other countries, Goyal said: "Tickets in China are 87 per cent higher than India. Airfares in Australia are 182 per cent higher than India's domestic fares and in the US they are priced 119 per cent more than India."
"Any increase in fares in India (necessitated because of high operating costs and taxation) will have a direct negative impact on passenger growth," Goyal said.
Striking a note of caution on the high tax levy on air turbine fuel, which he hoped would be rationalised, and the double whammy of steep airport levies, the balance sheets of airlines have been adversely impacted. "This is the burden neither the airline nor our passengers can afford to bear any longer," said Goyal.
Stating that Jet needs about $180 million to improve the balance sheet for this financial year, Goyal said he is finding it difficult to raise money in the current negative environment though it renewed the shareholders' approval to raise $400 million. "Investors want the fundamental problems of the sector to be resolved first and they are watching the sector closely."
Jet, which has a debt burden of $2.46 billion, is looking to raise money through sale and leaseback of its aircraft, to get the much-needed $180 million for the current financial year. It sold four of its old Boeing 737-400s and also plans for a sale and leaseback of more Boeing aircraft to get capital. "We target $25-30 million from each aircraft," Jet said.
Also realising that his low-cost competitors are slowly strengthening regional presence, Goyal said Jet Airways wants to take full advantage of the government encouragement towards regional connectivity and is evaluating a possibility of adding a different aircraft type for these routes like what SpiceJet has done with its Bombardier Q400s.
"There is now a think tank in the airline that is specifically looking at enhancing regional connectivity and we are also looking at regional jets, like those from Embraer and Bombardier for Tier-II and -III routes," Goyal said
No comments:
Post a Comment