Jet Airways has announced its third quarter results. The company's net profit was down at Rs 40 crore (Rs 400 million) from Rs 61 crore (Rs 610 million) in the corresponding previous quarter.

The management of the company says that their market share currently stands slightly below 30% in the domestic market. According to them, seasonally, the fourth quarter is not as good as the third.

They inform that their load factor went up to 75% during the past quarter.

As regards their international operations, Wolfgang Prock-Schauer, CEO of the company says that they are close to the break even level, and that international losses are down to USD 2.5 million.

Going forward, the company plans to undertake capital raising exercise, subject to market conditions.

Prock-Schauer: This was a very good quarter for us; we had a bottomline improvement and posted net profit before tax of Rs 14 million and net profit of Rs 9 million. Also the topline growth was very good - about 35% increase in revenues; so we are going to be the fastest growing airlines in the world.

And this compares to a loss, which we have had in the first half of this financial year. This was helped by several measures that we had taken. First of all, load factors went up significantly to about 70%, yield improved and the results for our cost savings programmes also shows first results. So overall, we are optimistic that we have improved and situations look much better.

Parthasarathy: Yes it is, consistent with what we have articulated at the end of last year. We plan to do three to five sale or leaseback every year. We have completed four aircrafts this year, one of which was in the quarter just ended. That generated a profit before tax of USD 10.9 million for the company.

Prock-Schauer: In our international operations this quarter, we are very close to breakeven and the losses has narrowed down to USD 2.5 million; so we are at breakeven levels and all the international operations, our SAARC operations as well as the Asean ones are profitable.

In London, the losses have narrowed down to a very small figure. And this is consistent with what we have always been saying; we will need something like eighteen months for our long haul flights to break even and that we have achieved in this quarter.

Parthasarathy: The EBITDA margins in the quarter just ended was 16%, which is up from 2% in the previous quarter; so we have seen a substantial expansion in them. I should add here that the margin is exclusive of any profits on the sale-leaseback. So this is the core operating profit of the company.

We saw a reduction in fuel prices for about 11% between the second quarter and the third and fuel prices on an average were up about 10% versus the same last year, but they were down sequentially QoQ, which had boosted the company’s profitability.

Prock-Schauer: On the load factor side, the overall figure is close to 70%, while the domestic figure is slightly higher at 71-72%. International load factor is slightly below 70% - around 68%. So there is no big difference between international and domestic load factors.

Prock-Schauer: The last official figures that were available to us are that Jet is slightly below 30% market share in domestic operations.

Prock-Schauer: We see the load factor trend right now in January to be continued in a very good way. We are satisfied with the load factor trend in January and we have to wait for the months of February- March, which are traditionally very lower season, so we have to see that but January is looking good.

Parthasarthy: We don’t normally give earnings guidance in relation to forward quarters. What we can say is that for the fourth quarter which is the quarter ending March out of which January and February are looking good so far but much will depend on how the month of March turns out.

As you know seasonally the third quarter is the best quarter of the year and the fourth quarter is not as good as the third and the first and the second quarters are typically the weaker quarters of the year so that is broadly how we expect the seasonality trends to develop.

Parthasarthy: Our current debt equity ratio stands at 2.5 times. As we indicated two quarters ago, our intention is to undertake a capital raising exercise, those plans remain very much on the agenda but are obviously subject to market conditions. We are monitoring discussions with our bankers, share prices to see what might be the best time for us to access the market.

Prock-Schauer: You are referring to increase in staff cost, there are several reasons to it but if you look at our company, it has grown by about 35% in production compared to the situation one year ago and naturally you need more staff to do that. Then you have to get annual increments for staff and then we have to shift into higher paid categories of staff. We have employed 150 pilots and generally pilots come in at a higher cost, so all this combines in increase in staff cost. Attrition rates have slowed down, we don’t have any problems on the pilot side.

Prock-Schauer: On the yield side, we see the yields stabilizing so we could keep a reasonably good yield and also feel that more rational pricing is in the whole industry now. But we have been in the peak seasons although it is always easier; there is not much pressure on yield and much will depend on when we come into the lean season and how the players will price it.

But as there are independent estimates that the whole industry is loosing a lot of money, we hope and think that the players will act in a rational manner in terms of pricing. Load factors are developing reasonably and we are more than 70% plus now and it is a load factor one can be satisfied with.

Prock-Schauer: Our current tariff is 30% full fare and 70% discounted and we see this trend or ratio stabilizing at this level.

Parthasarthy: Once our business reaches steady state, which is going to be in a few years from now, given that we are embarking on a significant expansion of our international operations, we expect company wide EBITDA margins to stabilize in the 22-24% rang, which is obviously a longer-term forecast; we are still away from there but that will require us to stabilize our international operations, which will be done in 2008-09 fiscals when there will be bulk expansion.