The second year of Jet Airways-Etihad partnership led to an expansion of services between India-Abu Dhabi, $150 million debt infusion in the Indian carrier and enhanced co-operation in marketing and cargo business.
Jet Airways, however, is yet to achieve strong profitability though it reported a modest Rs 3 crore profit in third quarter FY15.
On April 24, 2013, the two airlines signed a deal for equity infusion by Etihad in Jet, loan guarantees, purchase of Jet's slots at London’s Heathrow airport, investing in Jet’s frequent flyer programme and cooperation in commercial, engineering and operational areas.
The Rs 2,057-crore investment for a 24% stake in Jet concluded in November 2013 and the Rs 900-crore investment in Jet's frequent flyer programme was completed last March. Securities and Exchange Board of India gave its approval last May after the two airlines diluted their commercial co-operation agreements to ensure control remained with Indian management.
Jet Airways still has to appoint two board members as sanctioned board strength as per agreements is fourteen.
Jet Airways made a consolidated net profit of Rs 3 crore in Q3FY2015, its first profit since December 2012. But in nine month period ending December Jet made a stand alone loss of Rs 84.7 crore and consolidated loss (including JetLite) of Rs 297 crore. In the first nine months of FY 2014 it had made a consolidated loss of Rs 1630 crore.
However as a result of increase in cash from operations and fund infusion the airline has been able to reduce its debt and settle creditor dues.
“Dues owed to creditors have now reduced to what I believe very acceptable level,” the airline's chief executive officer Cramer Ball told research analysts in February.
Jet Airways and Etihad have also added flights between India and Abu Dhabi and expanded their code share partnership to include routes in Europe, US and Africa. Codeshare traffic surged by 93% from 162,476 passengers flown in Q3FY14 to 314,351 in Q3FY15, the airline said.
The alliance has benefited Jet Airways is marketing and cargo business.
Etihad and Jet jointly sponsor Mumbai Indians IPL cricket team and it would have been difficult for Jet to commit funds for sponsorship on its own. “Etihad is flush with funds,” a Jet source remarked.
Etihad is wet leasing its Airbus A330 freighter aircraft to Jet Airways and it will operate cargo flights to a number of international and domestic destinations including Bangalore, Hong Kong, Hanoi and Singapore.
“Most of the last two years have gone in dealing with regulatory, legal and strategic issues including changes in management and business model. Capitalization issues and and an inability to deliver a viable domestic business have been other areas of concern. However since last December clarity on key strategic issues is visible and management focus on improving service levels is a positive outcome. Management stability is leading to confidence across stakeholders,” said Kapil Kaul of Centre for Asia Pacific Aviation.
According to aviation expert Saj Ahmad: “The alliance with Etihad allows Jet Airways to maintain its international routes and utilise greater traffic flows via connections in Abu Dhabi. Etihad's fleet allows for greater code shares and reduces the need for Jet Airways to fly the same routes that overlap from India. In the next 18 months, we simply have to see some profitability, otherwise questions will be asked as to why its taking so long to be profitable - from a passenger standpoint, the connection options out of India via Abu Dhabi are increased exponentially, but that has to translate into black ink too. If we look briefly as the alliance between Emirates and Qantas, which also started roughly two years ago, Qantas' international business has turned a corner from making heavy losses and is now showing small profits which will get bigger upon development in their partnership.”
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