Jet Airways (India) Ltd's strategy of cutting down domestic capacity and redeploying it on international routes has yielded a rich dividend. The airline posted Rs 93 crore profit for the third quarter, compared with Rs 122 crore loss in the year-ago period.
International operations accounted for 56 per cent of Jet's revenue and almost 90 per cent of the pre-tax profit (Rs 91 crore) on a stand-alone basis the Decembre quarter. "We decided to take capacity out of domestic routes and move it to the international sector because of lower fuel costs and better yields. As soon as domestic market stabilises and starts to grow, we will grow again. Bottom line is our primary focus,'' a top Jet executive said.
Along with reduction in fuel expense due to lesser number of flights, Jet also cut down on its wage bill. "Employee costs are down as most foreign pilots have left and due to reduction of staff in administration departments,'' he said
Jet's domestic capacity shrank 11 per cent and it carried 13 per cent less passengers in the last quarter, but yields improved 22.9 per cent as the airline was able to charge higher fares on account of peak season demand. Loads, too, dropped 2.5 per cent as Jet-JetLite (rebranded as Jet Konnect) market share in the domestic market has been declining.
Despite operating fewer flights, Jet-JetLite still has the highest capacity in the domestic sector (27 per cent), compared with IndiGo's 26 per cent. IndiGo carries more passengers and leads the market with 27.3 per cent share against 25.1 per cent of Jet.
The airline is also leasing out its excess wide-body capacity. "We are looking to finalise the lease of four airbus A330s and two of them are likely to be leased to Oman Air. We have several options for Boeing 777 and will take decision in next 10 days,'' the executive said. Jet has five Boeing 777s on lease to Thai Airways and the lease term expires in a few months.
Over the past few months, Jet has pulled out of loss-making routes , which helped in improving its overall international performance. However, this also led to instances of aircraft on ground in the short term, the impact of which for the quarter was approximately Rs 55 crore. These aircraft will be redeployed in the months to come, the airline said in a statement on Friday.
"All of our efforts on revenues, costs and network side have resulted in turning around the airline operations. This is despite higher fuel prices and rupee depreciation impact that we have had in the last few months. The combined impact of higher yields and lower costs (excluding fuel) have resulted in significantly lowering the break-even seat factor levels in the business," Jet chief executive officer Nikos Kardassis said.
"We continue in our endeavor on cost-cutting measures, exploring various avenues of ancillary revenues and process improvements across all segments of the business, which will help us improve the business further,'' Kardassis added.