Jet Airways To Reform Amidst Record Loss
Wednesday, 28th May 2014 at 07:14am
Jet Airways is set to make reforms in business strategy in the hopes of tempering losses that has put a strain on its annual operating costs.
During the first quarter of this year, Jet Airways continued its losing streak by posting a record-breaking loss of Rs21 billion. This record-setting quarterly loss is 300% more than it posted over the previous quarter of Rs5 billion.
The continuing losing saga prompted the airline to carry out reforms that it hopes to implement in the soonest possible time.
Last year, Jet Airways signed a partnership with Abu Dhabi-based Etihad Airways for a 24% stake purchase deal by the Gulf carrier. The purchase deal was approved by the regulatory body following the relaxation of the country's FDI law in October 2012.
Jet has not been profitable for the last seven years since 2007. Its 2014 first-quarter net loss is its biggest, a record-setting number, more than half of the total net loss for the fiscal year. Its total net loss during the last fiscal year ending March amounted to over Rs41 billion.
The full-service airline allocated Rs7 billion to its low-cost subsidiary, JetLite, which is also piling up losses.
In general, Indian carriers have been down with losses during the last five years, resulting to a national aviation crisis that peaked in 2012, causing the untimely collapse of the now-defunct Kingfisher Airlines.
This alarmed the government and immediately made a drastic measure by amending its FDI law hoping to attract foreign investors to inject capital into the struggling airlines. This allows foreign investors to own up to 49% share in a local airline venture, as against 24% prior to the amendment.
Etihad's 24% ownership in Jet is its initial investment in the country's local airline. Etihad CEO, Australian-born James Hogan, revealed that it is committed to help Jet Airways in its reform plans as its long-term strategic partner.
By: Pete Lee.