Shares of India’s second biggest airline by market share, Jet Airways plunged 14% and touched its 52-week low in morning trade this week after the company deferred announcing the June quarter numbers.

In a BSE (Bombay Stock Exchange) filing, the Naresh Goyal-run airline said the board of directors had decided not to review the unaudited financial performance for the June quarter "pending
closure of certain matters," without providing more details.
Reports in Indian media suggest that the airline, in which Etihad Airways has a 24% stake, is struggling with a very tight liquidity position and highly stretched balance sheet. It reportedly has
cash just enough to survive for 60 more days. It is facing several challenges including a surge in fuel prices, weaker rupee and intensifying competition.
Gloomy outlook
A report in the Economic Times said: "The macro pressures coupled with legacy costs - fleet, maintenance, distribution and salaries - seems to have led the airline into a perfect storm. The
airline is estimated to be bleeding Rs 5 crore-10 crore (US$800,000 to US$1.5 million) daily in operating expenses alone."
Banks are therefore reluctant to lend additional working capital until it shows a turnaround plan. The company hasn’t defaulted yet but with huge repayment obligations spread over three years,
the outlook is grim.
Co-owner Etihad Airways, which itself is facing financial constraints, has also tightened its purse strings. As some of its other airline investments have soured it is not ready to burn more cash
to keep Jet Airways operating.
Even a few weeks back, the Economic Times report noted, "investors couldn’t have possibly second guessed the massive turbulence that Jet Airways was flying into yet again. This May, Jet
celebrated its 25th anniversary with much cheer. Company statements attributed words of supreme confidence to its chairman Naresh Goyal, who owns a 51% stake in Jet Airways."

Will Etihad step out?
“The outlook remains bright,” Goyal said in the latest Jet Airways annual report. On another occasion, he indicated that an investment in ailing national carrier Air India wasn’t off the
airline’s radar. The Indian government of prime minister Najendra Modi earlier this year halted its efforts to find a buyer for its 76% stake in Air India.
Jet Airways signed a partnership agreement with Air France-KLM in November last year to expand operations between Europe and India with Air France-KLM. The pact has led to uncertainty over
whether Etihad will continue as a stakeholder in Jet Airways. Aviation consultant CAPA India said earlier this year that Etihad may sell its entire stake in Jet Airways by the December
quarter.
Jet Airways' CEO, Vinay Dube said in a statement last week that it is taking several measures to reduce costs and stay resilient. “Some of these include sales and distribution, payroll, and
maintenance, among many others.” Dube, a former senior vice president for Asia Pacific at Delta Air Lines, is the seventh CEO to head Jet Airways in 25 years.
Still (too) many presidents
The airline is also planning to cut down frequencies on loss-making routes and reduce revenue concentration risks by diversifying its overseas hubs adding Amsterdam, Paris, London and Singapore
through better partnerships with Air France-KLM/Delta.
This should improve load factors with the help of better connectivity. An executive says it has, since last year cut about 10% capacity to the Gulf, a loss-making sector due to lower demand and
high competition.
It may have to cut down more as the carrier remains a top-heavy organisation and the industry’s best paymaster for senior management. It still has 25 vice presidents, senior vice presidents and
executive vice presidents, even after the total strength of senior leadership halved in the last two years.
Nol van Fenema
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