Jet Airways Posts Biggest Loss in Three Years on Fuel

By Vipin V. Nair

Oct. 25 (Bloomberg) -- Jet Airways (India) Ltd., the nation's largest domestic carrier, posted its biggest quarterly loss in more than three years after jet fuel expenses surged.

The loss of 3.85 billion rupees ($77 million) for the three months ended Sept. 30 compared with a profit of 283.6 million rupees a year earlier, the Mumbai-based airline said in a statement to the Bombay Stock Exchange today. Revenue rose 45 percent to 32.6 billion rupees.

The company's spending on fuel, its biggest expense, more than doubled after local oil refiners increased the price of kerosene. Jet Airways Chairman Naresh Goyal forged a partnership with rival Kingfisher Airlines Ltd. this month to cut expenses to offset below-cost fares, higher expenses and an economic slowdown that reduced demand for air travel.

``Aviation is worse off now because everybody is cutting down on travel,'' said Jayesh Shroff, who helps manage the equivalent of about $2.5 billion in equities at SBI Asset Management Co. in Mumbai. ``Getting back to profits is definitely not going to happen so soon.''

Indian oil refiners have raised the price of jet fuel 24 percent since the start of the year in Jet Airways's base of Mumbai, inflating expenses for the airline. The average rate of jet fuel rose 69 percent in the quarter to 67.18 rupees a liter. The carrier spent 16.9 billion rupees buying jet fuel in the period, compared with 6.96 billion rupees a year ago.

Record Loss

Higher operating costs because of a pilot-shortage, insufficient infrastructure and more competition may lead India's airline industry to a record $2 billion loss this year, according to the Centre for Asia Pacific Aviation. The industry's loss will be the worst in the world outside the U.S., according to the International Air Transport Association.

``The impending recession globally has also impacted travel patterns to a very large extent and we expect a slowdown in demand growth over the next few quarters,'' Jet Airways said in a statement. ``We have deferred our expansion plans and are postponing our aircraft deliveries by at least a year.''

Jet Airways carried 2.83 million passengers in the last quarter, 7.6 percent more than a year earlier. The airline filled 66.3 percent of available seats compared with 66.8 percent a year earlier, the statement said.

The loss before tax for the three months ended Sept. 30 would have been wider by 8.79 billion rupees if the company hadn't changed its accounting practices in the previous quarter, according to the statement. The carrier plans to write off its currency losses on overseas loans stemming from the rupee's fall as depreciation, instead of recording a charge in the quarter.

Rupee Drops

The rupee declined 9.2 percent in the three months through September, its biggest quarterly loss since March 1992.

India's local passenger traffic fell 8 percent in September to 2.68 million from 2.92 million in August, the civil aviation ministry said this month. Global airline-passenger traffic fell in September, the first drop in five years, as the credit-market crisis and slowing economic growth deterred tourists and business executives from flying, IATA said yesterday.

Jet Airways fell by a record 18 percent to 171.5 rupees in Mumbai yesterday, the lowest level since it began trading in March 2005.

To contact the reporter on this story: Vipin V. Nair in Mumbai at vnair12@bloomberg.net.