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India's Jet Airways to add 11 Boeing B737NG's as it looks to regain market share

India's Jet Airways to add 11 Boeing B737NG's as it looks to regain market share

2017 02 12

2017 02 12

* International business particularly Gulf sector business faces headwinds

Jet Airways is planning to add 11 Boeing 737 aircraft to arrest its falling domestic market share. The move to expand fleet follows a weak third quarter that also saw a slowdown in the West Asia market.

Jet Airways has a fleet of 114 planes, including 76 Boeing 737s, which it deploys on both domestic and short-haul overseas routes.

Sources said the airline would be inducting 11 aircraft on dry lease and these would be largely used  for domestic operations. The airline expects to induct the planes by 2017- end. "These will be incremental addition to the fleet," an airline source said.

Domestic traffic has been growing over 20% but Jet Airways has not been able to contribute much because its fleet size has remained flat over the last two years. Most of the airline’s capacity addition has come through higher fleet utilisation and its domestic market share declined from 21.4% to 17.9% in 2016. While the Indian aviation industry saw passenger volume growing at 23% in Q3 FY17, Jet's traffic grew a mere 1% in the same quarter.

Its net standalone profit declined 70% to Rs 142 crore in Q3 FY17 on a year-on-year basis on account of higher costs. Revenue growth was nearly flat in the same period with falling yields and increased competition.

In a post-result conference call with analysts, the airline's acting Chief Executive Officer Amit Agarwal said a slump in crude oil price and resultant impact on economies of West Asian countries had hit the airline. Also, average revenue per passenger on international routes declined by 11% during the quarter due to subdued demand from West Asia. Agarwal said the airline had to offer discounts to fill up flights which resulted in a fall in yields. Demonetisation also impacted leisure traffic on overseas routes in December, he added.

The fall in profit has given rise to investor concerns. In a note to its clients, global brokerage CLSA wrote: "Our concerns on the group's outlook are primarily on its stagnation in a fast growing industry, facing revenue pressure while having a relative cost disadvantage."

A Jet Airways spokesperson did not respond to email query on aircraft induction.

Deliveries for Jet Airways’ 75 Boeing B737MAX will begin from 2018 onwards. However, the 75 planes on order are largely replacements for planes that it will return on lease expiry and not for incremental addition.

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