Jet Airways

Dear Shareholders,
 
 The Financial Year 2008-09 has been one of the worst for the aviation
 industry in living memory.  Global industry losses during the period
 have been estimated at around US.4 billion or approximately
 Rs.52,000 crores. Of this, the share of the Indian aviation industry is
 estimated to be as high as about 19% - approximately Rs.10,000 crores
 or US billion - though it accounts for only about 2.5% of the
 estimated 1.7 billion passengers carried globally.
 
 This situation has been caused by two main factors. First, the very
 high costs of aviation turbine fuel, owing to the unprecedented
 escalation in the prices of crude oil during the first half of the
 year. While there was some abatement in the latter part of the year,
 crude prices have lately been rising again.
 
 The second has been the global economic downturn, which has led to a
 steep fall in the demand for air travel and intense pressure on yields.
 All major developed economies are now in recession. The effects of the
 sub-prime crisis in the United States triggered these adverse economic
 conditions. The aviation industry has always been one of the first
 victims of an economic slowdown and the present recessionary conditions
 have widely been described as the worst since the Great Depression of
 the 1930s. One of the key sectors affected by the economic meltdown has
 been the banking and financial services industries, which have hitherto
 been major generators of premium air travel.
 
 Keeping in view the widespread adverse impact of the economic downturn,
 the recovery of the aviation industry can be expected to take some time
 and can happen only after a reversal of the current recessionary trend
 that is manifest in the worlds major economies.
 
 India has not been insulated from these global events. Domestic air
 travel in the country in terms of passengers flown by all carriers
 combined, fell by an estimated 10% during the year under review
 compared to the previous year. This has worsened the overcapacity
 situation in the domestic market and has led carriers to put in place
 unrealistically low fares - that do not cover costs - in order to
 attract additional traffic Price has now emerged as the single most
 important factor in choosing an airline, even among corporate and
 business travellers, who have traditionally been a major component of
 our passenger traffic.  Additionally, the downturn in the economy has
 led most corporates to shift from business class travel to economy,
 resulting in a decline in the premium segment of the market.
 
 The Companys performance for the Financial Year 2008-09 must be viewed
 favourably considering the adverse and difficult conditions for the
 industry in India, and the estimated losses for the industry in the
 country. The Companys revenues for the Financial Year 2008-09 grew by
 23.4% over the previous year and Revenue Passenger Kilometres increased
 by over 26%.  These were mainly because of the growth of our
 international operations, which accounted for 53% of the Companys
 operating revenues. The number of passengers carried and passenger load
 factors were only marginally below the previous financial year, despite
 passenger traffic in the country falling significantly.
 
 In response to the new market realities and market dynamics, we
 introduced in May 2009, a new product called Jet Airways Konnect to
 serve routes where the traffic is predominantly price sensitive and
 where there is very little demand for a product that offers a high
 level of service. These are for the most part, regional and non-metro
 routes. Boeing 737 and ATR aircraft, both with all-economy seating
 configuration, are deployed on Jet Airways Konnect routes. On these
 flights, we offer the same standards of reliability, safety and
 passenger care, but limited in-flight service. Passengers can, however,
 purchase meals on board. Jet Airways Konnect supplements the operations
 of our subsidiary, Jet Lite, and offers a comparable product on many
 additional routes, thus effectively competing with low-fare, no-frill
 carriers. The response has been very encouraging. The creation of this
 product has enabled us to respond quickly to the changing market
 conditions. We are already operating around 127 flights under the Jet
 Airways Konnect brand out of our 265 flights per day on the domestic
 sectors and we intend to progressively increase the number further,
 depending on market developments. The strategy of switching a select
 number of our full service flights to Jet Airways Konnect has enabled
 us to increase the amount of revenues per flight on the relevant
 flights by between 5% to 10%.
 
 This new product works in tandem with our 100% subsidiary Jet Lite, a
 low-fare carrier. Revenues of Jet Lite (India) Limited for the
 Financial Year 2008-09 increased by 10.6% over the previous year.
 Despite difficult industry conditions, passenger yields improved by
 almost 4% and the number of passengers flown was only marginally lower
 than the previous years levels.  The re-branding of Jet Lite was
 completed during the year. The integration of most operational areas
 with Jet Airways has led to marked improvements in reliability, the
 quality of operations and services. It has also led to efficiencies and
 economies of scale for both companies. These synergies vindicate our
 acquisition of the airline.
 
 We maintain our high standard full service Jet Airways product on major
 metro routes, where the demand supports the product.
 
 Our international operations also faced receding demand and price
 sensitivity during the year. This was particularly severe in our
 long-haul routes to North America, Europe and the UK. As a consequence,
 we have replaced the Boeing 777-300ER aircraft on most of these routes
 with our smaller Airbus 330-200 aircraft. We have been successful in
 leasing out our Boeing 777 aircraft that have been rendered surplus, to
 other airlines. Our shorter haul routes to the SAARC and ASEAN
 countries performed satisfactorily under the circumstances that
 prevailed and the traffic on some of these routes support our west-
 bound routes, particularly to the Gulf countries and the UK. Our
 operations to the Gulf have also been very promising and we have
 commenced flights to Jeddah and will shortly commence flights to Riyadh
 in Saudi Arabia. These will mark our seventh and eighth destinations in
 the Middle East after Kuwait, Oman (Muscat), Abu Dhabi, Dubai, Bahrain
 and Qatar (Doha).
 
 The management team and staff are working ceaselessly to meet todays
 challenges:
 
 - In our domestic operations, we have been reacting rapidly to trends
 and market shifts almost on a daily basis. These involve adjustments to
 capacity and schedules, incentive programmes, dynamic pricing and the
 sale of group travel and tour packages.
 
 - We monitor the profitability of every route that we fly and take
 immediate remedial measures, where necessary. For example, we have
 suspended our flights to San Francisco (via Shanghai). We continue to
 support traffic for our international operations by ensuring
 connectivity with our domestic network and shorter haul network. We
 also continue to work closely with our code-share and alliance
 partners. Many of our Boeing 737 aircraft are deployed both on the
 domestic routes and on flights to the Gulf countries and South East
 Asia, thereby achieving higher utilization of the fleet.
 
 - We have put together dedicated teams to design and implement
 programmes to reduce, rationalize and monitor every element of cost and
 improve efficiencies and productivity.
 
 - We have re-negotiated major technical and non-technical contracts,
 and continue to do so.
 
 - We are re-structuring our aircraft lease agreements and have
 re-scheduled future deliveries with manufacturers and lessors.
 
 - We are rationalizing manpower as painlessly as possible. Wherever
 feasible, vacancies are not being filled and fresh recruitment has been
 frozen. We have implemented salary cuts and put increments on hold.
 
 - We have instituted an organization-wide scheme to encourage ideas and
 innovation at all levels.
 
 The volatility of crude oil prices continues to remain a major area of
 concern. Should aviation turbine fuel prices move to last years levels
 again, it would be a serious blow to the recovery of the aviation
 industry in India. I urge the Central and State Governments to
 rationalize the taxation on aviation turbine fuel.
 
 I also urge the Government of India and all stakeholders in the
 aviation industry to join hands to nurse the Indian aviation industry
 back to health. The Central Government, in particular, should take the
 lead in ensuring that major elements of cost including aviation turbine
 fuel, landing and navigation charges and airport charges are within
 affordable levels. We believe that the commencement of the Airport
 Economic Regulatory Authority (AERA) is a welcome step in this regard.
 
 For the industry to recover from its current ills and achieve
 long-term, self-sustaining growth, the airlines themselves and all
 stakeholders must together address the problems created by excess
 passenger capacity in the market, high input costs and the
 unsustainable, uneconomic fares regime. I strongly urge airlines and
 stakeholders to work together and take steps towards this end, without
 delay.
 
 While we expect difficult conditions to continue in the aviation
 industry worldwide for sometime, we believe that the overall economic
 outlook in India is more positive than in many other large economies.
 If the forecasted economic growth in India is achieved, it should have
 a positive long-term impact on air travel.
 
 I would, in particular, like to thank our banks and lenders for their
 support at this very critical time, together with all our stakeholders,
 including suppliers and service providers as also our airline partners
 for their continued support. I thank the Government and aviation
 regulatory bodies for their continuous support and for their efforts to
 modernize infrastructure.
 
 My gratitude goes out to our passengers for flying with us - most
 particularly, our loyal 1.5 million Jet Privilege members. I thank
 shareholders for their continued support, patience and understanding.
 Shareholders will join me in thanking our management and staff for
 their relentless efforts during these difficult and challenging times.
 
 Mumbai                                                  Naresh Goyal
 16th July, 2009                                             Chairman