Budget Carriers, Surging Fuel Prices Pushes Jet Airways India Ltd Into A Corner

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New Delhi: Challenge from budget carriers and surging fuel prices are backing the Jet Airways India Ltd into a corner, which was once at the forefront of India’s rapidly growing market for air travel.

Shares of the carrier, part-owned by Etihad Airways PJSC, plunged as much as 15% Friday in Mumbai after the company postponed announcing its first-quarter earnings, less than a week after denying a report that it needs drastic measures to cut costs and bolster its finances. The stock is headed for its worst year since 2011 as Jet Airways’s finances deteriorated and the default risk on its debt obligations increased.

Budget airlines such as IndiGo, GoAir and SpiceJet expanded exponentially in the past decade, giving first-time flyers a new opportunity and middle-class families an alternative to full-service carriers that offered lounges and free meals on board. India, the world’s fastest-growing major aviation market, is also one of the toughest in which to survive, with premium carrier Kingfisher Airlines collapsing and legacy Air India needing repeated state bailouts as ultra-low fares fail to cover their costs.

“Jet Airways is facing challenges on all fronts,” Bloomberg Intelligence’s Singapore-based analyst Rahul Kapoor said. “The rise in oil prices is having a double whammy on their earnings. They already have a sparse balance sheet compared with other Indian carriers.”

India is one of the toughest markets, where airlines are forced to sell tickets at base prices of as low as 1 rupee (2 cents) to attract the fastest growing middle class in the world. Kingfisher Airlines, started by Indian tycoon Vijay Mallya in 2005, was one of the nation’s leading carriers until it was grounded in 2012 amid mounting debt. Indian airlines are among the biggest customers for the single-aisle planes made by Airbus SE and Boeing Co.

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