Jet Airways Q4FY09 Post Result Conference Call Transcript

Transcription

1 Jet Airways Q4FY09 Post Result Conference Call Transcript Representative: Mr. Saroj Datta - Executive Director Mr. Wolfgang Prock-Schauer - Chief Executive Officer Mr. M. Shivkumar Sr. Vice President (Finance) PL Rep.: Mihir M Shah Date: 26th May, 2009 Ladies and gentlemen, good afternoon and welcome to the Jet Airways Q4 FY `09 Results Conference Call hosted by Prabhudas Lilladher. As a reminder, all participants will be in listen only mode and there will be an opportunity for you to ask questions at the end of today s presentation. Should you need assistance during the conference call, please signal an operator by pressing * and then 0 on your touchtone phone. I would now like to hand the conference over to Mr. Mihir Shah from Prabhudas Lilladher. Thank you and over to you Mr. Shah. Mr. Mihir Shah Prabhudas Lilladher Thank you moderator. On behalf of Prabhudas Lilladher let me welcome you all for the Q4 FY `09 Conference Call for Jet Airways. From the management today, we have with us Mr. Saroj Datta- Executive Director, Mr. Wolfgang, Chief Executive Officer and Mr. M. Sivakumar, Senior Vice President (Finance) for Jet Airways. I would now like to pass on the floor to Mr. Wolfgang to disclose the quarterly results and other developments for the quarter and the year at large. Over to you sir. Thank you very much. Ladies and gentlemen my name is Wolfgang Prock-Schauer, welcome to Jet Airways fourth quarter results call I have with me today Mr.S K Datta, our Executive Director Mr. Sivakumar, Senior VP (Finance). We will first go through the highlights of results for Jet Airways and Jet Lite and then go to the Q&A thereafter. I hope all of you have gone through the presentations which we have put up on our website as well as the results, press release. Let me take you through the key highlights in the industry scenario after which I will take you through the detailed performance. Despite a significant drop in crude oil prices, airlines across the world are experiencing turbulent times. IATA has forecast a demand drop of 3-5% for The global recession has impacted corporate travel as earnings are slowing down and companies are significantly cutting down costs iand travel, is one of them. Leisure travel has also been impacted due to the slowdown. The Indian domestic market has shown a decline of around 10% for the year ended March 2009 and as against this capacity offered has reduced only by 3% for the period. For Q4, industry capacity was lower by 11% while industry passenger was lowered by 12%. Currently the industry is operating at seat factors of mid sixties and yields have been on the decline due to the low occupancy in the business class.

2 Our passenger market share for the quarter was 17.9% for Jet Airways and 7.3% for Jet Lite. The international business has also been tough but we have been able to adjust our capacity successfully and as a part of this exercise, as on date nine of our long haul aircraft has been leased out. Of the remaining capacity, we have achieved healthy seat factor but with lower yields. In this difficult market situation, the company has been able to achieve an EBITDAR margin of 20.8% in Q4 FY `09 compared to 7.7% in Q4 FY `08 and 10.7% in the preceding quarter in Q3 FY`09 which is largely due to right sizing of capacity, leasing of long haul aircraft and implementation of comprehensive restructuring program, the details of which will be covered later during the call. Moving on to the operational highlights for Jet Airways for the quarter just ended. We achieved a system wide seat factor of 71.7%, that s 70.9% in the same period a year ago. Our system wide break even seat factor was 79.8% was 82.6% in the same period a year ago. As compared to this the breakeven for Q3 the preceding quarter this year was 71.6%. Domestic and international yields, as measured by revenue per revenue passenger kilometer where Rs for domestic and Rs.2.92 for international, as compared with Rs and Rs in the same period a year ago. During this quarter, our capacity on the international routes went down by around 1% as compared to Q4 last year and by 18.7% as compared to Q3 FY `09. Domestic capacity was down by 22.3% as compared to Q4 last year and by 3.3% as compared to Q3 in the current year. Overall revenues were down by 8.2% versus same period a year ago went down by 16.4% by leading versus the preceding quarter. Our domestic seat factor was 64.6% versus 74% in the same period a year ago. Our international seat factor was 75.3% versus 69% in the same period a year ago. Our operations as a whole showed a pretax profits of Rs million or US $27.5. versus a loss of Rs million or US $93.3 million during the same period last year. The breakdown of this number shows a profit of Rs million or US $22.1 million on the domestic operations and a profit of Rs. 273 million or US $5.4 on the international operations. The results have to be seen in the context of one time positive exceptional items amounting to Rs million or US $51.4 million for the business as a whole. The key operating highlights for the quarter in case of Jet Lite are as under. Revenues for the period were Rs million or US $65.9 million and Loss after tax was Rs million or US $25.9 million. Let me now place the results in context. Beginning with domestic: The overall domestic markets has witnessed negative trend due to economic slowdown especially in the premium segments. We see this situation continuing for the next few months during which yields will be under pressure. The industry capacity reduced by 12% for the fourth quarter versus the same period a year ago. Jet Airways achieved seat load factor of 64.6% and Jet Lite seat load factor of 67.8% for the quarter which is in line with the industry of seat load factors.

3 The depreciation of rupee against US $50.72 in Q4 FY `09 versus $40.12 in the same period a year ago has resulted in higher operating cost and has effect the operating margins. The average fuel rate in Q4 for our domestic operations has reduced to Rs per litre which was lower than Q4 for FY `08 rates by 37.5% as compared to Q3 FY 09 by 34.2%. This has helped in reduction of operating cost as compared to previous year same quarter. Results for domestic operations for the quarter includes one time positive exceptional items amounting to Rs million or US $42.7 million and this includes CENVAT credit and Mark to market derivatives. The company has reduced capacity by 22.3% in Q4 FY `09 compared to Q4 FY `08. This coincides with the expiries of certain aircraft leases which the company chose not to replace Iand as did nto result in significant capacity idle or unutilised. The domestic EBITDAR margins was 16.8% in Q4 FY `09 compared to 12.1% in last year s quarter Q4 FY `08 and 10.2% in Q3 FY `09. The current fuel surcharges are 2300 per coupon for distances less than 750 kms and 3150 for passenger travelling more than 750 kms. Moving to international, International operations of Jet Airways have shown improved performance in Q4 this year as compared to Q4 last year and Q3 this year. The upward trend was visible in all key markets and was supported by network restructuring on the North America routes as well as the full impact of cacnellation of weak and non performing routes to US, UK and Gulf. Excess capacity was eliminated by leasing out of nine long haul aircrafts, which further strengthened the results by generating income streams to cover idle costs of aircrafts on grounds. The share of international operating revenues to total was over 56% in Q4. Our international operations as a whole showed a pre-tax profits of Rs. 273 million or US $5.4 million versus the pre-tax loss of Rs million or US $65.6 million for the same period last year and loss of Rs million or US $24.4 million in the immediately preceding quarter. The average seat factor for key international routes for Q4 were as under. USA routes at 79.3%, SAARC routes were 75.6% UK routes for the quarter was 76.7% ASEAN routes were 78.3%, Gulf routes were 62.1%. These are healthy load factor levels and most of our routes are profitable or very close to being profitable at these load factor levels. Two of our A330 aircrafts has been leased out to Oman Air in the month of May and while three Boeing 777s were wet leased to Turkish airlines and Four boeing 777s were wet leased to Gulf Air over the last few months. As part of our network rationalization exercise Mumbai - Dubai first frequency is now serviced by Boeing 737 in place of A330 and second frequency introduced a second frequency, serviced by Boeing 737 on 23rd April of And also started Chennai-Dubai on Boeing 737 with effect from 23 rd April Results for international operations for the quarter include profits on sales and lease back of aircraft amounting to Rs.440 million or US $8.7 million.

4 There were still some instances of aircraft ground for the quarter, the impact of which was approximately $9 million of the whole quarter. EBITDAR margin in the international operations stands at 24% for Q4 FY `09, versus 1.6% for Q4 FY `08 and 11.2% for Q3 FY 08. Showing a continuous upward development in our EBITDA margins. With these capacity levels currently deployed, we will consolidate our international operations over the next few quarters and have postponed future deliveries by atleast one or two years Let me now spare a moment to update you on the Jet Lite operations. The operating result of Jet Lite for the fourth quarter as under, Achieved seat factor is 69.1%, versus 69.5% a year ago in the same quarter. Revenues of Rs million or US $65.9 million versus Rs million or US $96.6 million in Q4 FY `08. EBITDAR is Rs. 165 million or US $3.3 million in Q4 FY `09, versus a negative EBITDAR of Rs. 832 million or US $20.7 million in Q4 FY `08 and Rs. 509 million or US $10.5 million in the preceding quarter FY `09. EBITDAR margins were at 5.3% in Q4 FY `09, there is negative 21.8% in Q4 FY `08 and positive 12% in the preceding quarter Q3 FY `09. Loss after tax is Rs million or US $25.9 million, loss of Rs million or US $40.7 million in Q4 FY `08. The revenue per revenue passenger kilometer is Rs3.5 in Q4 FY `09, versus Rs. 3.2 in the same period one year ago. Q3 and Q4 saw significant improvement in EBITDAR margins as compared to Q1 and Q2 due to synergies in cost and operations between Jet Airways and Jet Lite and optimized revenue management. The Jet Lite fleet over the period will be renewed with newer aircrafts replacing the old sleases which starts expiring in some months year. The code share agreement between Jet Airways and Jet Lite is helping the company in improving traffic as well as our network coverage. Turning to the current quarter and the outlook. The global economic environment coupled with economic realities of airlines industry in India requires exceptional efforts to return to breakeven and profitability. We expect the year ahead to be challenging in terms of continued sluggish demands for both domestic and international operations. It is more visible on the premium segments and, thus putting pressure on overall yields. The company has in anticipation already initiated a comprehensive cost reductiong and other improvement programs which includes the following elements. Network restructuring, rationalising personnel costs, restructuring of aircraft leases, debt restructuring, cash conservation and cost savings measures, maximizing Jet Lite Jet Airways synergies, intensifying alliances and code share benefits and deferment of aircraft deliveries for the next 1-2 years This restructuring programme will enable the company to achieve cost savings and help the company to conserve cash in a difficult financial environment.

5 The Implementation of the programme is regularly monitored and the full impact of this programme will be seen in the coming financial year. For the short to medium term the company is adapting the existing market realities and intends to capture price sensitive market segments through our new product Jet Konnect in addition to the JetLite offering. These are no frill economy class service designated to meet the needs of the low fare segment. The Jet Airways Konnect service will complement Jet Lite and not compete with it. The company sees additional market opportunities in the international markets with Boeing 737 operations to Jeddah,Riyad and additional services to Asean and SAARC regions in the near future. Let me close by addressing the Balance Sheet and our funding position. Our cash position as on March end for the Group is Rs billion or US $261.9 million By Q3 end and Q4 we have drawn down term loans to the extent of Rs crores, equivalent of US $400 million from Indian banks. On Balance Sheet predate, debt was Rs billion or US $3.1billion. Our shareholders funds as of 31st March 2009 were Rs billion or US $622 million, giving us a gross debt toequity ratio of five times. That s all from our side, ladies and gentlemen we are open to questions. Thank you sir. Ladies and gentlemen we will now begin with the question and answer session. At this time if you would like to ask a question, please press * and then 1 on your touchtone phone. Please use only handsets while asking a question. Anyone who has a question may press * and 1 at this time. Participants who have a question may press * and 1 on their touchtone phone. The first question is from the line of Mr. Mahantesh Sabarad from Centrum Broking. Please go ahead. Good afternoon sir, very good operational numbers. I was just wanting to understand that you had mentioned in your concluding remarks about Debt being 5 times your shareholder s funds. Where do you see Jet now going forward? Can you kindly elaborate for a company like yours as to how you manage to get these debts. What was the underlying collateral securities that you are offering? Yeah. Let me make some general remarks, you are completely right. I agree, we cannot continue increasing debt and for this reason we have implemented this comprehensive restructuring programme which i had mentioned earlier. This is primarily because of limited capacity in raising additional debts. What we are doing right now is to turn around the operations and generate cash and gradually we would like to bring down our debt level so that it becomes manageable. And when the time is right in the capital markets, we will also look at raising additional equity. This is not the right time so we are still waiting for the appropriate moment. But the general point is to bring our debts down compared to equity level. Sir, you can you give us a breakup of this debt.?

6 The major part of the debt is against the aircraft assets and certain things on stocks and receivables and certain things on future credit card receivables. So how much would be on your working capital, how much is on the aircraft? Air craft is about Rs. 12,000 crores. Jet Airways Sir do we assume that value of the aircraft that you hold is worth 12,000 crores or more? That s more than that. How much will be your NAV on aircrafts sir? In terms of market value you can say another Rs. 1,000-2,000 crores more than the current value we are carrying in the Balance Sheet. It will be a general estimation at this juncture. Sir what is your fleet plan ahead? Mr. Saroj Datta, Executive Director Jet Airways We plan to stabilize our fleet for next 1-2 years and after we see that our operations stabilizes and is profitable, we will continue expanding again. Sir, just for my clarification you have 86 aircrafts right now in Jet and you are going to give up 3 of these, whose leases will expire, actually they would have expired in April. Can you give us an update on that and secondly what is your fleet additions for the year? Mr. Saroj Datta, Executive Director Jet Airways Our operating fleet will remain the same, the leased aircrafts which will expire will be replaced by new leased aircrafts, overall the numbers of aircrafts will remain the same in this financial year. So against the leases that were expired in April you are going to re-lease another set of aircraft. Are these going to be Boeing replaced by ATR sir? No these will be one to one replacement, I would like to mention here is the that the leases which are expired were actually our classic 737s so we break out the complete classic fleet which will enable us to achieve better operating efficiencies. Thank you very much sir. For more questions I will come back later on the line. Thank you Mr. Sabarad. The next question is from the line of Mr. Hemant Patel from Enam Securities. Please go ahead. Mr. Hemant Patel - Enam Securities Hello sir. Couple of questions, one on wet lease, you mentioned that you have 9 aircrafts on wet lease, I guess from the last conversation, you mentioned that these wet lease will become dry lease in financial year `10, whereas the revenues

7 for these will be lower. Can you give us some indication as to what would be the quantum and how many of the aircrafts are going to be on dry lease? Well, the Turkish leases will be converted into dry leases and we are talking about 4 aircrafts which would be converted from June-July onwards into dry lease. With respect to Gulf Air, the wet lease will expire in October and still our discussions are on as to what extent this will be converted into dry lease. We can inform whenever the situation is clear. Oman Air is continuing until October-November of this year and the lease of aircraft after this will expire. In terms of revenue, when you convert from wet lease to a dry lease, rough about 40-45% reduction is estimated. Mr. Hemant Patel - Enam Securities In terms of Jet Airways Konnect and Jet Lite, could you go through as to where are these operating on,which routes and how do you perceive a difference between them because in terms of consumer perception, I think one would look at only low cost and full service carrier, where would the difference lie actually? First of all Jet Airways Konnect is much more closely associated with Jet Airways. It is Jet Airways aircraft where we have set a variation to the product. There are several reasons why we have chosen to launch this product this way. It is a very fast way to adapt to changing market eventualities. We found Jet Konnect to be the best way to adapt to these changing market variables and doing this through Jet Lite would have taken a longer time. We will now see how the whole market develops and then we decide how to proceed further. But for Jet it is positioned in a way that it will not compete with Jet Lite. We also believe that Jet Lite has a very specific customer segment. So these two plans are going to complement each other and not compete with each other. Mr. Hemant Patel - Enam Securities Would they be operating on the same routes as well on cat2 and cat3? Basically we avoid duplication but there could be instances in say some very high density routes. There could be a possibility,but basically there will be now overlap between the two. Mr. Saroj Datta, Executive Director Jet Airways I would like to add one more thing, please remember Jet Airways Konnect is not a separate airline. So the question of cat2, cat3, cat1 operations does not apply to Jet Airways Konnect separately. Jet Airways Konnect is an integral part of Jet Airways. Mr. Hemant Patel - Enam Securities In terms of debt what will be the quantum which is due in FY`10? About Rs crores with respect to the aircraft loans. Mr. Hemant Patel - Enam Securities And I guess we have nothing to pass it on because you are deferring new deliveries? Jet Airways Mr. Saroj Datta, Executive Director Jet Airways Yes. Mr. Hemant Patel - Enam Securities You mentioned that quite a few of the Jet Lite fleet has been replaced by new aircraft. Can you give me break down of that? I think there are 22 aircrafts at the moment, how many would be new?

8 Mr. Saroj Datta, Executive Director Jet Airways They have not been replaced, they will be replaced going forward. Mr. Hemant Patel - Enam Securities And one final question on the restructuring programme. Could you give us an indication as to what would be the extent of cost benefit that you plan to achieve right, from these measures? Yeah I mean this total programme that we have been talking has an overall impact of about US $600 million and this is divided into US $160 million in network restructuring. It started over the last financial year basically in international long haul services with high loss making routes. A cost saving programme which has positive impact of USD 170 million which goes through all department and areas of the company and lastly cash conservation which is about USD 270 million. Under cash conservation we have agreed with bankers for a delayed payment schedules which will enable us to conserve cash. Not all of it is directed through P&L but some of it is cash flow related. Mr. Hemant Patel - Enam Securities Thanks a lot. Best of luck. Moderator Mellisa Thank you Mr. Patel. The next question is from the line of Mr. Anish Desai of ABN Amro. Please go ahead. Mr. Anish Desai from ABN Amro. Please go ahead. Hi. Just a question on the domestic capacities, for the industry what is the kind of capacity increase or decrease we are expecting in FY `10? FY `10 we have planned for stable capacities, partial staging of stable capacity in domestic operations. So we have to see the context that we had right now about 20% less capacities in domestic in Jet Airways but now it is time to stabilize. In industry, we still have capacity in the market and we watch the situation very carefully because this is one of the reasons why we could believe that this domestic markets is not showing the desired results. So if I had to gauage, what kind of load factors you ll would expect for Jet and Jet Lite in FY `10. What do you expect in terms of load factors and where do you see the yields as well? Here very specifically to Jet Lite? Jet and Jet Lite. We have seen in recent months a slight improvement in the load factor development. What used to be mid sixties is moved close to 70s at Jet Lite, even mid 70s. So there is some improvement on this side but it all comes at a lower yield. If industry wide capacity goes down significantly then we can see improved yields and coupled with improvement in the economy the premium traffic will return,which will result in the improvement of yields. But we have to be prepared for a scenario where yields are depressed and for that reason we have launched this new sub-brand Jet Airways Konnect in order to cater to more price sensitive travellers.

9 Just to get some idea in terms of profitability, what will be the breakeven loads currently. What are the breakeven loads for Jet and Jet Lite? The breakeven loads in Jet Lite, for this quarter are in the magnitudes of mid 80s. I have to say in the preceding quarter they have been around 70% because of a sharp yield chop,it deteriorated. But we tried to manage and optimize resources to come somewhere in the 75-80% in Jet Lite. So Jet Lite it made 80, for Jet it would be? Jet Airways Sorry? For Jet what would be the breakeven loads? Jet Airways domestically we had an break even load factor of around 80% at this point of time. This was also due to the fact that the yields that dropped by 80% compared to Q3 and if you just look at Q3 the breakeven factor is 67% in domestic operations. So there is a sharp increase in break even because of the yields drop and we hope that the capacity stabilizes or even reduces, and with the economy picking up, it goes to 70-75% it should be achievable. And currently what would be the loads that Jet and Jet Lite are doing? As I said in the beginning Jet Airways is now closer to 70% and Jet Lite is anywhere between 75-80%. So they are still slightly shy of breaking even? We are not yet there, as I said in my comments, this is an area of concern and those elements of these programmes, they have capacity rationalization industry wide plus provides hopefully revive the economy which will be break even levels down to a reasonable level so that we can achieve our goals in the coming year. And just on international if you could give us the breakeven loads and what are the loads currently? International breakeven is 75% so it is behind the breakeven situation position now. And you mentioned that there is cost savings of around $170 million, how much of that already has been achieved and how much is pending that could come through in FY `10? Jet Airways 170, most of it I would say because we have started the process already in the last financial year. So you will see the results in FY `10. Would that be mostly personnel cost or is it? That includes all elements, that includes renegotiation, leasing contract and personnel cost so everything is included in that. But cost saving is an exercise which goes into all elements of the company and there has been major measures which brings that number to 170.

10 Most of it already has been achieved in FY `09? Yes but it has been done throughout the year, the true year effect will be seen in FY `10. Just in terms of Jet Lite it seems that domestic operations of Jet is doing or is coming to breakeven, it seems to be closer to breakeven while Jet Lite still seems to be quite far. So what seems to be the differentiating factor why Jet Lite is not recovering? You have to see that Jet Lite starts with a position very very high. If you see the trend Jet Lite is also improving. We have achieved in the last 2 quarters, first time we have achieved EBITDAR margins. And any specific plans for breakeven in Jet Lite and when do you see that happening? Jet Lite s break even factor is higher than Jet Airways, it will require full synergies of Jet Airways and Jet Lite. I would not like to comment at this point in time and say yes the breakeven is possible in FY `10. Jet Lite started from poor profitability so it might take FY `11 to achieve this. Jet Airways And just in terms of lease revenues, the aircraft with Oman and Gulf will get released in October so they will be leased out for 6 months or do you expect an extension? Right now there is nothing confirmed up in terms of extension and we will see that how we can use the aircraft, we are evaluating different possibilities, talks are going on at this point in time. And Turkish airways the aircraft gets converted to dry, how long is that contract valid then? 25 months from the date of delivery of aircraft. Alright. Thank you. Thank you Mr. Desai. The next question is from the line of Mr. Pramod Kumar of B&K Securities. Please go ahead. Mr. Pramod Kumar - B&K Securities Yeah good afternoon everyone. Sir can you just throw some more light on the derivative losses of Rs. 133 crores which were during the quarter. Just want to understand it is real losses on the contracts which have expired or is it just no stock entry? Additional losses, validity of the contract in 2011, some will be expiring in 2009, some will be expiring in Mr. Pramod Kumar - B&K Securities

11 Ok. So nothing, no real loses but just year as such on the derivatives side? There are some deals which we have closed out, there were 14 deals which were outstanding in the beginning of April 2008 and in 2009 it is close to 17 which we have closed out. Impact of these will be around Rs crores. Mr. Pramod Kumar - B&K Securities And the second question would be on the staff strength, currently you have around 12,500 staff and what would be the ideal staff strength which you are looking at considering that you are looking at a stable fleet going forward and also some of the wet leases converting into dry leases on the international side. Also you are talking about cost cutting exercise? so what would be the ideal staff strength which we would be aiming at? Our staff strength was 13,300 in January 2009 and end of this month we have reached staff strength of 12,500 and this also includes attrition and I will not like to comment any further as we would like to see to what extent the leases will get converted into continuous wet lease or get converted into dry lease. I would not want to comment any further on this personnel numbers. Mr. Pramod Kumar - B&K Securities My next question is more on the product thing. In terms of possible FDI, in terms of foreign airlines being allowed to invest in domestic carriers. Do you expect that are we talking to some foreign airlines like you expect Jet Airways to be also beneficiary and come as a strategic partner coming in. And because earlier I think the stand was that it may actually not happen for bigger airlines like Jet and Kingfisher, because of the sheer size? Our position is very clear with the current 49% FDIs for non-airline entities. The airlines will now be trying to conserve cash and cannot expect a significant money flowing in at this juncture in this aviation industry. Also it has to be taken into account that the aviation industry in India is weak and any airlines will naturally take advantage of that and it is not the right moment. Mr. Pramod Kumar - B&K Securities Ok. Fair enough sir. And on the sales side are we looking at any longer term contracts so that we can tie-up our sales prices for the rest of the year because now I think the expectation is generally the true price inch up further from current levels and we have already seen for the last couple of fortnights that the ATF prices have been on the rise. And I think we started doing something on those lines so anything concrete or anything substantial there? Individually we will not go to large scale hedging at this point of time. There is a proposal, let s say industry wide basis as a Federation of Indian Airlines we have been proposing that oil companies actually could undertake fuel hedging on behalf of the airlines in India. Mr. Pramod Kumar - B&K Securities And sir last question would be on the alliance with Kingfisher. So anything concrete which you can talk about or how much of the cost cutting we are looking can come through with this particular alliance with Kingfisher airlines? 1 The talk is still in progress and as soon as we have some information to share we will come up with that. Mr. Pramod Kumar - B&K Securities Ok. Fair enough. Best of luck for the future. Thank you.

12 Thank you Mr. Kumar. The next question is from the line of Mr. Anirudh Datta of CLSA. Please go ahead. Good afternoon sir. I have few questions, one is the reduction in the selling and distribution expenses that we have seen in the current quarter, do you think is it sustainable at the current levels or whether their one off efforts made during the quarter in terms of these expenses which has seen the reduction and it is likely to return to normal levels going forward? There are no exceptional items in selling and distribution expenses. So it is part of the ongoing exercise to reduce our distribution expenses. Could you give a sense of what is the proportion of Net sales at the current, in the last financial year or in the last quarter? And what you mentioned about selling and distribution expenses, the same holds true also for the other operating expenses as mentioned in your segmental results particularly with reference to the domestic operations? Net sales is about 8%, what was the question? The other operating expenses as mentioned in your domestic operations at segmental results, that s come down significantly over the December quarter. So there again has been a trend over the last few quarters of reduction but do you think these are the normal levels or is there again something one off out there? Cut back in operating cost will gives lot of administrative cost reduction, closing down of some of the office in some of the regions and the overall cost restructuring programme we have organized. And what was the interest capitalized in the last quarter in the last financial year? Rs. 70 crores. For the last financial year? Yes. And the CENVAT credit that you have taken, that does not get reflected in the results of Jet Lite that you have announced? No, we have not taken the credit for Jet Lite, there is some confirmation which we are waiting for. This I presume is the excise duty you are paying on fuel etc.? At present paying on the fuel and that pertains to the earlier period. Till 31st March 2008? Earlier to 2008, it raises between some to And your outlook for 2009?

13 Earlier it was different based on utilization and now in 2009 based on whatever output that is taxable, only to the extent of percentage of inputs can be claimed So today it is much lower than what it was. Ok so this applies only for this that is one off, in the sense till 2008 whatever you have accumulated, this can be carried forward indefinitely? It will be carried forward indefinitely. But for whatever you have paid out in 2009 it can be only setup against actuals that you have paid. Therefore the benefit you get is much smaller. Is my understanding right? Yeah absolutely right, depending upon how much of service tax you are paying on the output. Yeah, absolutely. Thank you, that s all I had to ask. Thank you Mr. Datta. The next question is from the line of Mr. Prakhar Sharma of CLSA. Please go ahead. Mr. Prakhar Sharma CLSA Hello sir. I just wanted to confirm few things. How much has been the revenues from lease of wide bodies in this quarter, the value? $32.61 million. Mr. Prakhar Sharma CLSA Just wanted to reconfirm, the Rs. 70 crores of interest capitalization is for this full year, right? For the full year. Mr. Prakhar Sharma CLSA Sir there is tax item in the Jet Lite quarterly results of about Rs. 68 crores for this quarter. I wanted to understand what is this item, there was a negative tax item if I can recall in the first quarter for Jet Lite which was a negative tax item and there has been positive tax items in this fourth quarter. I just wanted to understand clearly what is happening on that line? This is nothing to do with deferred tax in Jet Lite which we were carrying, earlier it was deferred tax asset which has got to be reversed and is reversed now. Mr. Prakhar Sharma CLSA Ok. Fair enough sir. Thanks a lot. Thank you Mr. Sharma. The next question is from the line of Mr. Anand Gupta of SBI Mutual Fund. Please go ahead. Mr. Anand Gupta - SBI Mutual Fund. Hi. Can you talk about pricing disciplines in the industry both in domestic and international sides and in-between during the month of Feb. there was an indication that there is some kind of price rationality and they were not willing to

14 undercut each other. Then again the pricing has fallen so it looks like looking at the screen what kind of prices are there. So wanted to know your comments there? I mean, clearly if you see that the yield drop indicates low pricing stability in the market since it is a very competitive environment. If over capacity remains then mostly this pressure occurs. Internationally I think the airlines around the globe have the same problem as the demand is falling. Mr. Anand Gupta - SBI Mutual Fund. And at the moment are there any signals of rationalization going forward? From a distance, one gets the feeling that there is an economic recovery and there if funding available to the industry. Then again people will commit to capacity and that will again create a additional capacity vis-à-vis demand? The loss rate of Indian carriers are the highest in the world and out of the $5 billion loss 1.5 to 2 bn comes out of India. So we feel that this situation cannot continue for long and either capacity rationalization or consolidation in the market is the need of the hour. In these circumstances investors will be very hestitant to give more funds if they see that the money is lost at this rate. So at one point of time, we see consolidation coming so that the industry becomes healthy. Mr. Anand Gupta - SBI Mutual Fund. Thanks. Thank you Mr. Gupta. The next question is from the line of Mr. Vipul Arora of Aadhar Securities. Please go ahead. Mr. Vipul Arora - Aadhar Securities Sir just wanted to know the cost per ASKMs came at current ATF prices? The cost per ASKMS came in domestic it is 4.86, it is for Q4 `09. Mr. Vipul Arora - Aadhar Securities Thanks. Thank you Mr. Arora. The next follow-up question is from the line of Mr. Mahantesh Sabarad from Centrum Broking. Please go ahead. Sir about the Balance Sheet can you tell us what are your foreign currency loans at this point in time? We have about Rs crores, it is mainly foreign currency loans. And how are they structured for commercial terms? Rs crores, most of it is foreign currency loans barring Rs. 800 crores which is rupee currency loans, as far as aircrafts are concerned they are linked with Libor. Libors plus what? Libors plus basis points for a 12 year loan.

15 What could be the mean or the average? Our effective rate for aircraft loans is 3.82% today. And have you hedged your interest rates already? Have you done any swops for that? This is the deal that we have done, we have taken hit of Rs.133 crores and these are linked with interest rate swops which we will be taking in the current financial year. And what kind of foreign currency assets you have on your Balance Sheet? Foreign currency assets is the combination of aircraft that we have. Value sir? Valuewise, the aircraft assets are around Rs 13,000 crores, Rs. 12,000 crores. In the working capital side we have debtors of Rs. 732 crores out of which 50% is in foreign currency. Is it because of the international operations? Are the wet leases all paid for, $34 million revenues that you got. Is it lying in debtors? Mr. Saroj Datta, Executive Director Jet Airways The rentals of wet leases are paid at the beginning of every month. So there is no question of anything being owed by leases to Jet Airways. One remark from you, if we were to stress your Balance Sheet based on currency movements and if rupee were to appreciate from the current levels. What would it translate into? Mr. Saroj Datta, Executive Director Jet Airways In the 2 scenarios one is Jet and Jet Lite, in Jet Lite we have been tremendously positive, the income is generally in rupees and while expenditure can be in the form of dollars to some extent. In Jet Airways the ratio involved 50:50 and based on this there could be an overall saving of about 7%. 7% on what sir, on how much movement in currency? Mr. Saroj Datta, Executive Director Jet Airways On the cost, 50% of the cost. You considered the period from last year fiscal year to this year fiscal end? Mr. Saroj Datta, Executive Director Jet Airways If your question is currency movement if it will impact Jet Airways results and Jet Lite.In case of Jet Airways, depending upon any limit in the currency, it depends whether it is dollar or pound or euro because we have business in these locations and consistent appreciation in all the currencies will definitely improve our operating margins. Ok sir. Thank you very much. Thank you Mr. Sabarad.

16 Participants who have a question may press * and 1 on their touchtone phone. The next question is from the line of Mr. Vijay Nara of Centrum. Please go ahead. Mr. Vijay Nara Centrum Hello. Sir I wanted to know the accounting policy on revaluation of liabilities. So is it valued straight away to the assets or is it adjusted against the reserves? All opening adjustments have been carried out against the reserves and in terms of the annual liability since FY 2008, the same has been adjusted against the carrying cost of the asset. Mr. Vijay Nara Centrum What would be the quantum of that? About 234 crores Mr. Vijay Nara Centrum Thanks. Thank you Mr. Nara. The next question is from the line of Mr. Arun Subramanian of Bank Of America. Please go ahead. Mr. Arun Subramanian - Bank Of America Hi, this is Arun here, just a small question. I might have missed it earlier but sorry for repeating in that case. On your fleet can you just give us a breakup of how much of it is own fleet and how much of it is leased fleet? And second question kindly let us know that out of the 86 aircrafts which you have right now, 9 has been leased out, so your current operational aircraft would remain at 70? No, 48 is leased, 39 is owned and out of 39, 9 has been leased out. Mr. Arun Subramanian - Bank Of America So 77 operate on your network and 9 on other, right? Yeah. Mr. Arun Subramanian - Bank Of America Ok. Thank you so much. Thank you Mr. Subramaniam. As there are no further questions I would like to hand the floor back to Mr. Mihir Shah for closing comments. Please go ahead. Mr. Shah please go ahead. Mr. Mihir Shah Prabhudas Lilladher Thanks everyone for been on the call. I wish you all, all the very best for the coming quarters. Thank you very much. Bye. END. Jet Airways Prabhudas Lilladher Pvt. Ltd. 3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai , India Tel: (91 22) Fax: (91 22) Rating Distribution of Research Coverage