Jet Airways, caught in a turbulent weather of rising fuel costs and low ticket prices, is looking to monetise assets, including its loyalty programme, and various cost cutting measures in order to reduce debt and improve bottomlines.
"The two significant proposals considered by the board of directors, i.e., infusion of capital and the monetisation of the airline’s stake in its loyalty programme bode well for the long-term financial health and sustainability of the airline,” Naresh Goyal, Chairman of Jet Airways said.
The country's second largest airline by market share will look at a comprehensive cost reduction, including maintenance costs, selling and distribution costs, fuel rate and optimisation, debt and interest cost reduction and enhancement of crew and manpower productivity, which Jet expects will result in over Rs 2,000 crore of cost reduction over the next two years.
At the same time, through tactical initiatives around pricing, network, inventory management and sales, the airline will look at 3-4 per cent growth in revenue per available seat kilometer (RASK). It is also looking at "wet leasing" its excess ATR aircraft, capital infusion and debt reduction, which will help it reduce its interest costs and in turn boost profitability.
Private equity firms are reportedly keen on investing in Jet Airways' loyalty programme Jet Privilege, which now has 8.5 million members.
The first of the new fuel efficient Boeing 737 Max airplane was inducted into service recently and 10 more will be added through the course of the year. Jet has ordered 225 such planes, which will be delivered over the next decade, and should help it enhance operational reliability, replace older planes and expand its network footprint.
India's aviation industry has been caught amid surging fuel prices; crude oil prices have topped $75 a barrel this year. At the same time, the rupee has depreciated past the 70 mark amid strengthening of US dollar against a basket of currencies. Even as costs have soared, ticket prices are among the lowest. That has hurt airlines.
Jet Airways reported a net loss of Rs 1,326 crore in the April-June quarter, versus a profit of Rs 58 crore, a year ago. Total revenue for the quarter rose 5.2 per cent to Rs 6,257 crore.
"The rise in the price of brent fuel, a depreciating rupee and a resulting mismatch between high fuel prices and low fares have adversely impacted the Indian aviation industry, including Jet Airways," said Vinay Dube, CEO of Jet Airways.
During the quarter, its fleet utilisation increased 3.7 per cent to 12.98 hours, its non-fuel costs per available seat kilometer (CASK) fell 1.5 per cent and revenue passenger kilometer rose 7.6 per cent.
"I am confident that the various transformation initiatives identified and under implementation by the company will help in addressing the challenges faced by us. In fact, several such transformation initiatives have already started to deliver positive results," added Dube.
Amid the troubles at Jet Airways, all eyes have been on its partner Etihad, which holds a 24 per cent stake in the airline. A spokesperson for the Abu Dhabi-based airline said it remains committed to the strategic partnership with Jet Airways as it explores and leverages the opportunities presented by the growing Indian aviation market.