GoAir profit plunges 95% to Rs 5.5 crore in FY14 Airline blames ATF price rise, weak rupee for 95% decrease in net profit GoAir’s net profit slumped to Rs 5.44 crore for FY 14 from Rs 104 crore the previous year, according to the airline’s balance sheet filed with the Ministry of Corporate Affairs. A rise in fuel costs and currency depreciation impacted the profits of all domestic airlines, including GoAir. Industry leader IndiGo’s profit dropped by 60 per cent. GoAir is unlisted and does not disclose quarterly results. It flies 19 Airbus A320 planes and has a market share of around 9 per cent. TOUGH TIMES GoAir’s net profit slumped to Rs 5.44 crore this financial year from Rs 104 crore the previous year The company flies 19 Airbus A320 planes and has a market share of around 9% GoAir’s operating revenue rose 26.7% to Rs 2,435 crore in FY 14 from Rs 1.921 crore in the previous financial year GoAir’s operating revenue rose 26.7 per cent to Rs 2,435 crore in FY 14 from Rs 1.921 crore in the previous financial year. Total revenue, including non-operating and other income, was Rs 2,463 crore, registering a similar growth over the previous year’s figure. But the airline’s earnings before interest, tax, depreciation and amortisation (Ebitda) halved to Rs 129 crore, pointing to an increase in operating expenses. It made a pre-tax profit of Rs 8.37 crore against Rs 147 crore in the last financial year. GoAir’s profit in 2012-13 was reported on the back of changes in accounting policies with respect to aircraft lease rentals. But for these changes, the airline would have reported a loss of Rs 79.28 crore, the company auditor had observed. The airline had then defended the accounting practice changes and said it was following an industry practice. “Last year, the airline industry in India recorded a huge increase in ATF (aviation turbine fuel) price and a severe weakness of the Indian rupee against the US dollar. These two components explain the erosion of profitability,” said a GoAir spokesperson. GoAir’s operating revenue rose 26.7 per cent to Rs 2,435 crore in FY 14 from Rs 1.921 crore in the previous financial year. Total revenue, including non-operating and other income, was Rs 2,463 crore, registering a similar growth over the previous year’s figure. But the airline’s earnings before interest, tax, depreciation and amortisation (Ebitda) halved to Rs 129 crore, pointing to an increase in operating expenses. It made a pre-tax profit of Rs 8.37 crore against Rs 147 crore in the last financial year. GoAir’s profit in 2012-13 was reported on the back of changes in accounting policies with respect to aircraft lease rentals. But for these changes, the airline would have reported a loss of Rs 79.28 crore, the company auditor had observed. The airline had then defended the accounting practice changes and said it was following an industry practice. “Last year, the airline industry in India recorded a huge increase in ATF (aviation turbine fuel) price and a severe weakness of the Indian rupee against the US dollar. These two components explain the erosion of profitability,” said a GoAir spokesperson. The spokesperson added: “A significant part of the borrowing is related to pre-delivery payments to the aircraft manufacturer for future deliveries. We will receive the aircraft in the next six years, starting in 2016.” The airline has 72 Airbus A320neo on order and will receive 17 of the planes over 2016 and 2017. The airline’s balance sheet for the financial year 2013-14 does not give a complete break up of expenses but the filing shows a sharp rise in debt, especially in short-term borrowings. Its short-term loans rose over three times to Rs 725 crore from Rs 215 crore in the previous year. “It is surprising that the borrowings have increased if the airline is making a profit,” an aviation expert remarked. In August, GoAir’s chief executive officer Giorgio De Roni had said the airline will increase its capacity, improve its loads with a focus on corporate sales and improved service. “We cannot compete with other airlines in frequency and network. But we can compete in the quality of service. We have had the least number of passenger complaints in the last year and we can say our quality of service has paid off,” De Roni said He said the airline aims to increase its revenue by over 36 per cent and carry over 6.7 million passengers in 2014-15. In 2013-14, the airline carried 5.5 million passengers. Prevailing government rules do not allow GoAir to fly abroad, limiting its foreign exchange earnings. As a result, while its expenses related to lease and maintenance get impacted by currency rate fluctuation, the airline does not have a hedge as it has no international operations and very limited dollar income.
Posted on: Tue, 28 Oct 2014 10:50:12 +0000