Fuel prices and fare wars take toll on Jet Airways
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Jet Airways and its low-fare unit JetLite, slipped into a loss after tax of about INR.200 crore in the fourth quarter compared with a INR 224 crore profit a year earlier as a result of steep fuel prices that wiped out gains.The figures, livemint.com said, might indicate how poorly India’s aviation industry had performed in the quarter ended March. “We were expecting Jet to report better results among the airlines because they have substantial international operations, which have higher margins,” Rashesh Shah, analyst at Mumbai-based brokerage firm ICICI Securities, was quoted saying.”We expect Kingfisher’s fourth quarter loss at INR 426 crore and SpiceJet at INR 6 crore.”Kingfisher Airlines and SpiceJet are the other two listed Indian carriers. They are expected to announce earnings in the next few weeks.”It’s only fuel, nothing else. Fuel has been a major burner,” Raj Sivakumar, vice-president (network planning, revenue management and distribution) at Jet Airways, was quoted saying in the report. Fuel prices constitute 30-50% of an Indian carrier’s costs. The average fuel price in the fourth quarter rose to INR57 a litre from INR.42 a litre in the year ago because of political turmoil in West Asia. According to Jet Airway’s Sivakumar, the airline had paid INR 343 crore more for fuel in the quarter than it did a year ago for the same level of operations.Apart from fuel, stiff competition among domestic carriers had also played a role in earnings at Jet Airways, which had been expected to make a full-year profit, the report said.”Jet lost its pricing power when Air India was discounting air fares,” Kapil Kaul, South Asia CEO at consulting firm Centre for Asia Pacific Aviation, was quoted saying.”What should have been profitable turned out to be a loss on account of these exceptional items.”
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