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Sat 13 Aug 2016 09:09 AM

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Etihad-backed Jet Airways maintains profit run despite tough conditions

Indian carrier profitable for fifth straight quarter as efficiency drive and equity partnership strategy kicks in

Etihad-backed Jet Airways maintains profit run despite tough conditions
Indias Jet Airways chairman Naresh Goyal (R) and James Hogan, group chief executive officer of Etihad Aviation Group. (AFP/Getty Images)

India’s second-largest airline, Jet
Airways, has remained profitable for the fifth quarter in a row, despite
intense competition in its local market and the weakness of the Indian rupee.

The carrier, in which Abu Dhabi’s Etihad
Airways holds a 24 percent stake, saw operating profits increase by 124 percent
to $33 million in the first quarter of its financial year, helped by more
efficient utilisation of its aircraft, growth in capacity and a successful efficiency drive.  

Net profit stood at $19 million, compared
to $36 million in the same period the year previously, although last year’s
figure was helped by a one-time gain from aircraft lessors.

Revenue dipped by 2 percent to $806 million,
while the airline also reduced its debt by $53 million during the same period.

Jet Airways saw a 4.4 percent increase in
passengers carried to 6.6 million, boosted by a 13 percent surge in overall traffic
from codeshare partners.

Moreover, the airline also reported a 41
percent increase in passengers delivered by Etihad and the UAE flag-carrier’s
other equity partners, reflecting the success of a strategy that has seen the
Abu Dhabi operator buy stakes in seven different airlines around the world in
recent years.

Together, Etihad and Jet Airways now offer
more flights to and from Indian than any other airline, with a 20 percent share
of the market.  

Total cost per available seat kilometre
excluding fuel fell by 1.2 percent to 4.77 US cents during the same period.

“We have been able to report lower non-fuel
cost in spite of inflationary increases and weakening of Indian Rupee against
US dollar by almost 6 percent,” Jet Airways chairman Naresh Goyal said, in a
statement. “Due to the intense competitive environment, industry yields were
under pressure in Q1 and the trend is expected to continue in Q2.”

Indian airfares are amongst the lowest in
the world, with cutthroat competition affecting many airlines’ margins. Budget
airline IndiGo, the largest airline in the country in terms of passengers
carried, saw its profits slip by 7.3 percent. While state-owned carrier Air
India may make an operational profit this financial year, it has repeatedly
been bailed out by the government and has debts of $7.5 billion.

In its 2016 financial year, Jet Airways reported
profits of $185 million compared to a loss of $345 million the year before,
while revenue rose 5.9 percent to $3.4 billion during the same period.

In late April, Etihad itself posted a record
net profit of $103 million for 2015.

The airline said its partnership strategy
had resulted in an additional $1.4 billion in revenues in 2015, a 22 percent
rise on the previous year, as well as adding 5 million passengers.

Etihad said the policy had enabled it to
expand connectivity, reduce costs by creating economies of scale, and generate
additional revenue.

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