India's second biggest carrier Jet Airways, close to a tie-up with Abu Dhabi's
Etihad Airways, swung to a quarterly profit of 850 million rupees ($15.98m) on Friday on lower costs and rising fares in an under-serviced
Jet shares have almost doubled in the past three months as Etihad's plans to
pick up a stake in the airline have become clearer.
The Jet deal, if closed, will be the first since India relaxed ownership
rules in September last year and allowed foreign carriers to buy up to 49
percent in domestic carriers that are battling stiff competition and high
Jet's earnings surprised analysts, who according to Thomson Reuters,
were expecting a profit of 278.5 million rupees. It was the third straight
quarter it has exceeded estimates.
The October-December earnings were a sharp turn around from a 1.01 billion
rupees loss from a year earlier.
Pricing power in the market has improved leading to a 17.1 percent jump in
yields - a measure of average revenue per passenger - and that is likely to
continue, Jet said in a statement to the Bombay Stock Exchange.
Kingfisher Airlines, controlled by liquor baron Vijay Mallya and once India's
No. 2 carrier, has stopped flying since the start of October, allowing other
carriers to raise fares on key routes.
Budget carrier SpiceJet, which is also in talks with foreign airlines to sell
a stake, swung to a quarterly profit at the end of 2012, and said it would
target a bigger slice of revenue from international flights in the
Fiercely competitive Indian carriers are struggling under massive debt, as
they have to sell tickets below-cost in a market marred by high taxes on fuel
and high airport charges.
"We continue in our endeavour 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," chief executive
Nikos Kardassis said in a statement.
Jet has discontinued flying to many loss-making routes in the past few
months, which sometimes meant aircraft getting grounded "in the short term," and
that hurt revenue by 550 million rupees, Jet said.
Top executives from Gulf carrier Etihad and Jet met Indian civil aviation
minister Ajit Singh and Trade minister Anand Sharma on Thursday, in a sign that
a deal is likely to be announced soon.
"Pursuant to the announcement of liberalised FDI (foreign direct investment)
policy permitting foreign investment in Indian airline, the company is in
discussion with a reputed airline for a strategic investment in the company,"
Jet said on Friday.
Jet expects to finalise a stake sale deal with Abu Dhabi's Etihad Airways in
a week or so, an executive at the airline, who declined to be named,
The terms of the possible deal have not been disclosed, but a government
source said earlier this month Etihad was in talks to pick up a 24 percent stake
in Jet for up to $330m.
Any deal between an Indian carrier and a foreign airline has to be cleared by
the Indian government.
Jet shares closed 0.32 percent up at 623.30 rupees on the National Stock
Exchange, outperforming the broader market which fell 0.57 percent.
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