The results of Jet Airways for the December 2018 quarter reflect the financial woes at this beleaguered airline.

The company reported a net loss of Rs 587.77 crore for the third quarter of the current fiscal vis-à-vis a profit of Rs 165.25 crore a year earlier. Revenue from operations of the airline barely increased 1% on a y-o-y basis to Rs 6,148 crore in the December 2018 quarter.

Once again, the key input cost, aircraft fuel expenses soared to 29.8% y-o-y – touching Rs 2,387.7 crore in the third quarter of current fiscal, and has adversely affected the airline's performance. As a result, the company reported an operating loss of Rs 268 crore in the December 2018 quarter vis-à-vis an operating profit of Rs 425 crore a year earlier.

The airlines precarious position is highlighted by the company pointing out its negative net worth of Rs 1,037 crore at the end of the third quarter of the current fiscal. Negative net worth of a company highlights a rather difficult financial situation in which a company's liabilities exceed its assets plus shareholders’ equity. Jet Airways has not provided its latest balance sheet for the December 2018 quarter, which has made analysing its loan/liabilities position rather difficult.

In addition, the airline has also pointed out that its current liabilities exceed current assets by Rs 9,610.16 crore at the end of the third quarter of the current fiscal.

Also read: What Needs to be Done to Keep Jet Airways in the Skies?

It’s no surprise that even in the December 2018 quarter, the company was finding it difficult to finance its day-to-day operations. In a press release dated February 7, 2019, the airline pointed out that four aircrafts have been grounded due to non-payment of amounts outstanding to lessors under lease agreements.

Media reports have also highlighted a disturbance in daily flight operations for the troubled airline on account of the above situation. The quarterly results were declared after the close of Thursday's trade, but the stock closed broadly at Rs 225.8, and is hovering above its 52-week low of Rs 163, which it reached on October 1, 2018.

Also, during the December 2018 quarter, the airline defaulted in repaying the working capital loan instalments, including interest due to Indian banks – which it highlighted to have partly paid in January 2019.  However, substantial payments remain overdue to creditors. The difficult financial conditions at the airline have not gone unnoticed with the rating agency, ICRA, which has revised downward the rating of Jet Airways for its long-term loans and debentures to ‘D’.

Earlier, other leading players in the aviation sector also felt the impact of rising fuel costs and reported a fall in their net profit for the December 2018 quarter. For instance, InterGlobe Aviation, which runs Indigo, reported a 75% y-o-y fall in its net profit to Rs 190.8 crore in the December 2018 quarter.

Flight path ahead

Investors are eagerly awaiting the restructuring process of Jet Airways under the SBI-led consortium of lenders, which would enable the struggling airline to find a new route for survival in a rather difficult operating environment marked by high fuel prices.

Jet Airways pointed out that the SBI-led consortium of lenders estimated a funding gap of nearly Rs 8,500 crore and various options, including equity raising along with debt restructuring plans, are being considered, amongst other options.

The airline is also convening a shareholders meeting on February 21, where it will seek to allow lenders to convert their debt into 11.4 crore equity shares, allowing  lenders to emerge as the largest shareholders. Naresh Goyal, promoter of Jet Airways, held a 51% stake in the company at the end of the December 2018 quarter.

While there has been media speculation on whether Abu Dhabi-based Etihad Airways – which held a 24% stake in Jet Airways at the end of the December 2018 quarter – would take its place at the helm of the airline, there has been no official announcement.

Nevertheless, it is apparent that the lenders-led consortium needs to induct a global airline with strong operational and financial skills, in a bid to make Jet Airways soar once again.

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