How Indian carriers sank in financial crises
Jet Airways had to do a lot of firefighting in the last few days — first after it said its financial situation was precarious, and later when it deferred announcing its quarterly performance numbers.
Much of the airline’s woes are symptomatic of the aviation sector.
The deferment of Jet Airways’ June quarter results on August 9 to an unspecified date came after the company’s annual general meeting of its shareholders.
In a filing to the Bombay Stock Exchange, the airline said the board of directors decided not to review the unaudited financial performance for the June quarter.
"The audit committee did not recommend financial results to the board for its approval, pending closure of certain matters," the airline said.
The deferment of its results sent the company’s stocks plunging on the BSE on Friday. Shares of the carrier, which had earlier warned of stringent measures to tide over its financial constraints in the face of rising fuel costs and stiff competition from rivals, fell 8.39 per cent on the BSE on Friday to close at Rs 276.40.
The stock is down 66.75 per cent since the beginning of this year and has lost 50.71 per cent during the last one year, reports say.
Indian airlines are facing turbulence on rising fuel cost, a depreciating rupee, high airport navigation fees and undercutting of tariffs amidst intense competition.
A few days ago, Jet Airways said it will be unable to fly beyond 60 days unless drastic cost-cutting measures, including a 25 per cent pay cut, are put in place, and approached investment bankers again to help sell a stake in the carrier.
According to reports, the management team informed employees in Mumbai and Delhi recently that the airline's financials are in a bad shape and drastic measures were needed to be taken to cut costs. The airlines later withdrew its move to cut staff salaries after certain sections of the staff resisted it.
Last month, low-cost carrier IndiGo had said its net profit for this April-June quarter plunged 97 per cent to Rs 28 crore due to the adverse impact of foreign exchange, high fuel prices and competitive fares.
Air India, meanwhile, has made losses of Rs 5,765 crore in fiscal 2017.
It is expected to lose up to Rs 13,699 crore over fiscal years 2019 and 2020, according to aviation advisory firm CAPA.
Meanwhile, Jet denied reports that its chairman of the audit committee S Vishwanathan had quit, but said his term of office had come to an end at the AGM held on August 9, which he attended in person.
“Since the management and the auditors informed the audit committee that they needed more time to finalise the accounts, the audit committee on their request agreed to accord them further time to finalise the accounts and directed that the finalised accounts be placed before the audit committee thereafter,” the statement said, adding that it was not the first time that corporate India delayed its financial results.
Jet has also clarified that it is regular in all its payment obligations to its banks and statutory obligations, including provident fund obligations.
“Our account with all banks as on date is ‘standard’,” it said.
“We have had scheduled amortisations in the past so many years and the company has met its repayment obligations all the time. This is evidenced by the reduction in the overall debt of the company by an amount of Rs 3,000 crore in the last three years,” it said.
(Courtesy of Mail Today)
Also read: Why Air India is finding no takers