Jet Airways Under Pressure From India's Budget Flight Boom
Jet Airways India Ltd. was once at the forefront of India's rapidly growing market for air travel, but a challenge from budget carriers and surging fuel prices are backing the airline into a corner.
Budget airlines such as IndiGo, GoAir and SpiceJet expanded exponentially in the past decade, giving first-time flyers a new opportunity and middle-class families an alternative to full-service carriers that offered lounges and free meals on board. India, the world's fastest-growing major aviation market, is also one of the toughest in which to survive, with premium carrier Kingfisher Airlines collapsing and legacy Air India needing repeated state bailouts as ultra-low fares fail to cover their costs.
India is one of the toughest markets, where airlines are forced to sell tickets at base prices of as low as 1 rupee (2 cents) to attract the fastest growing middle class in the world. Kingfisher Airlines, started by Indian tycoon Vijay Mallya in 2005, was one of the nation's leading carriers until it was grounded in 2012 amid mounting debt. Indian airlines are among the biggest customers for the single-aisle planes made by Airbus SE and Boeing Co.
In a brief statement late Thursday night, the company -- with a market value of $464 million -- said the audit committee didn't recommend the results for the board's approval, "pending closure of certain matters." The company slipped into a loss in the year ended March following two years of profit.
Deputy Chief Executive Officer Amit Agarwal said Jet Airways has regularly met its commitments on loans and is constantly evaluating opportunities to refinance or increase the tenure.
"They can do that by possibly doing sale and lease-back of their widebodies and getting costs down, especially in the domestic market," he said. "If they can recapitalize and restructure, then may be in a couple of years, they can be sustainable."
"We need to recover the money and value we have lost," Jet Airways Chairman Naresh Goyal said at the airline's annual general meeting Thursday. "I feel guilty, I feel embarrassed that we have not been able to perform, especially with shareholders who stood with us."
Jet Airways said last week that it's implementing several measures to reduce costs and increase revenue, in areas including sales and distribution, payroll and maintenance. The company at the time denied an Economic Times report it had already started firing people and had told some workers to take as much as a 25 percent cut in pay.