NEW DELHI: Jet Airways expects to conclude a $334m stake sale to Abu Dhabi’s Etihad by the year-end, the Indian airline said, one day after posting a record quarterly loss.
Jet, which has lost money in the past six years, is awaiting approvals from the Indian antitrust regulator for the deal and is on course to complete the transaction during this quarter, Chief Financial Officer Ravishankar Gopalakrishnan said.
An Etihad spokesman declined to comment, after Jet’s earnings announcement on Wednesday, on whether Jet’s quarterly loss would have any impact on the deal. The stake sale, cleared by India’s cabinet this month, is meant to help Jet break out of a pattern of losses in the domestic airline business.
The net loss widened to Rs8.91bn ($145m) in the three months ended September 30 from Rs997m a year earlier.
An economic slowdown also meant lower yields, a gauge of the average fare paid per kilometre flown, Jet said on Wednesday.
A fall in the value of India’s rupee currency, the high cost of fuel and an increase in fees at some airports also led to the loss, said India’s second-biggest carrier by domestic market share.
The loss in the fiscal second quarter is the biggest ever for Jet, the first of India’s airlines to publish earnings for the quarter, according to data compiled by Thomson Reuters from company filings. It reported a net loss of Rs7.1bn in the September quarter of 2011.
Despite the sector’s current problems, deep-pocketed foreign players such as Singapore Airlines, AirAsia Bhd and Etihad have been lured to the country by longer-term growth prospects.
The Indian government expects passenger air traffic to almost triple during the current decade.
Etihad’s $334m deal for a 24 percent stake in Jet is the first investment by a foreign carrier in an Indian airline since the country last year changed rules to help channel capital into a sector.
“The synergy between the two airlines in terms of commercial cooperation and the kind of cost synergies that we will achieve will be significantly increasing the profitability for the airlines in the coming quarters,” Jet’s Gopalakrishnan said.
Jet shares fell as much as 6.4 percent in Mumbai trading yesterday to their lowest level in about seven weeks, before paring losses to trade about 2 percent down by 0911 GMT. High costs of jet fuel and aggressive pricing as competition increases will likely hurt airlines’ finances in the coming quarters, analysts say. Jet paid 8 percent more for fuel from a year earlier, it said.
All players in India’s five-player airlines market are losing money with the exception of unlisted IndiGo, the biggest Indian carrier by local market share.
Kingfisher Airlines, once the No. 2 carrier, has not flown in a year for want of cash. India’s three listed airlines stocks — Jet, Kingfisher and SpiceJet — are the worst performers this year among 85 global airline stocks studied by Thomson Reuters StarMine.
Reuters
