Jet Airways expects H2FY12 to be better than the past

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Jet Airways expects H2FY12 to be better than the past

Due to the volatility in market, the aviation space has been facing a lot of pressure. Mahalingam Shivkumar, senior vice president of finance at Jet Airways expects a better third and fourth quarter than the past.

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Due to the volatility in market, the aviation space has been facing a lot of pressure. Mahalingam Shivkumar, senior vice president of finance at Jet Airways expects a better third and fourth quarter than the past. He also told CNBC-TV18, "In Q2, the trends will hold up at last year's levels and there will be a marginally increase, but the yields will remain under pressure."

Shivkumar also indicated that yields have been under stress because of high crude prices.

Here is the edited transcript of the interview. Also watch the accompanying video.

Q: What do you see on the demand trends front in terms of the load factors? What kind of volume growth would your company do this year?

A: Generally, the second quarter is a non-peak period. So, the domestic will come under some amount of pressure. On the international side, we are holding our targeted number. The third and fourth quarter will be much better than what it used to be.

As far as growth is concerned, there has been growth in Q1. It's early to talk about the Q2, but the trends will just hold up at last year's levels going forward. There will be a marginally increase, but the yields will remain under pressure.

Q: The competitive intensity in the sector is such that the yields might continue to remain under pressure and even load factors might be a bit sluggish domestically. Do you see this as lingering problems over the next two-three quarters?

A: Yield has always been a problem in last one and one-and-a-half years. We have burnt additional fuel worth Rs 1,000 crore in terms of price increases. However, the yield has marginally gone up last year by about Rs 100 crore. We have absorbed about Rs 900 crore into the system in the last financial year.

In the current financial year, there has been an increase in the fuel prices by about Rs 400-500 crore. There has been hardly any improvement in the yield. There is always a pressure on the prices. The irrational prices should not continue.

For orderly and long-term sustenance, we must review on how we would go about increasing our capacity to meet the demand.

Q: You have a considerable amount of debt which eats into your profits. Right now, raising equity capital would be very difficult for Jet Airways in such a market condition. How would you carry on with such a stressed balance sheet for the next year or two?

A: We have a debt of about Rs 13,400 crore, out of which Rs 9,000 crore is our acquired aircrafts. Against that, we have an asset worth Rs 9,000 crore and we have a balance of Rs 4,000 crore.

A part of it will be liquidated in the current year which includes our BKC deal whereby we will reduce it by Rs 500 crore. As far as our fund raising activity is concerned from equity side, it will take some more time. We will wait for the right time to go for the equity placement.

Q: A couple of your peers have offers from large size funds wanting to pick up stake in company. Is doing some kind of equity or using some kind of equity instrument an option in order to bring down your debt?

A: Not at this juncture.

Q: You said your growth would be very close to last years levels. What kind of a range are you holding out in terms of volume growth for FY12?

A: In the current year, we have grown by 15% in the first quarter as far as Jet Airways is concerned. Our second segment JetLite is also growing by 8-9%.

We have a growth target of about 15-20%, but it depends on how the market pans-out. The second quarter appears to be little under pressure, but third and forth quarter will hold up and we expect about a 15% growth.