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LETTER FROM THE CHAIRMAN:
In the year gone by, the prolonged economic crisis has thrown up many challenges for the global aviation industry. Indian aviation companies too, were no exception to these turbulent times.
Declining domestic traffic, a sharp depreciation of the rupee, high aviation fuel prices, increased landing and navigation charges at key metro airports in India and increased operational costs resulted in airlines incurring losses. These losses were exacerbated as airlines were unable to fully pass on these incremental costs to passengers. CAPA – Centre for Aviation, a leading provider of independent aviation market intelligence estimated that Indian airlines have posted a combined loss of USD 1.65 billion for financial year 2012–13.
Despite these trying circumstances, your Company has taken various steps to reduce costs and improve productivity. These included contract re–negotiations, route rationalisation by discontinuing loss making routes and re–deploying aircraft on more profitable routes, process improvements, focusing on incremental ancillary revenues and sale and lease back of aircraft.
As regards your airline, the international business has continued to be robust. In the financial year 2012–13, revenues from international operations accounted for 58 per cent of the Company's total revenues. Against the backdrop of a sluggish economic scenario, your airline has managed to achieve healthy seat factors on international routes.
Moving on to a significant development for your airline, I would first like to thank the Government of India, in particular, the Ministries of Civil Aviation, Commerce and Industry and Finance, for having the foresight to permit Foreign Direct Investment (FDI) in civil aviation in India. This is a significant reform. The much–needed infusion of FDI in Indian aviation will result in improving the economic fortunes of the industry, aid traffic growth at Indian airports and will create many job opportunities.
In line with the FDI policy of the Government of India, Jet Airways and Etihad Airways have forged a strategic alliance, wherein Etihad Airways will invest USD 379 Million for a 24% stake in Jet Airways. Etihad Airway's overall wider commitment to Jet Airways also includes an injection of USD 220 Million to create and strengthen a wide–ranging partnership between the two carriers. Towards this, Etihad Airways has paid USD 70 Million to purchase Jet Airways' three pairs of Heathrow slots through a sale and lease back agreement. Jet Airways continues to operate flights to London utilising these slots. Further, an amount of USD 150 Million will be invested by Etihad Airways by way of a majority equity investment in Jet Airways' frequent flyer programme, 'Jet Privilege'.
All these investments into your airline, however, are subject to obtaining the requisite regulatory and corporate approvals and final commercial agreements, which is expected to be completed within the next few months.
I am extremely happy to be in partnership with an airline that shares our customer–centric operational philosophy and ethos. I have no doubt that this partnership with Etihad Airways is a win–win situation for all our stakeholders, especially our guests, who will now have access to a much expanded global destination network. Thus, this partnership will offer a wider consumer choice to the Indian traveler by connecting 23 cities across the country to a significantly enhanced international market. This in turn, should facilitate further tourism inflows to the country and help promote trade and commerce.
More importantly, this partnership will strengthen the balance sheet of Jet Airways and will underpin future revenue streams, which will accelerate your airlines' return to sustainable profitability and liquidity.
IATA in its forecast for 2013 remains optimistic on the growth prospects of the aviation sector. This is based on the backdrop of improved and positive cues from global economies. The Indian economy too is expected to grow at a higher rate compared to the previous year. This will pave the way for a positive growth in demand for the Indian aviation sector in the current financial year.
In an effort to actively reach out to a larger cross–section of guests and to stay ahead in a competitive and challenging environment, Jet Airways has set up a joint 'Innovation Council' in partnership with International Business Machines Corporation (IBM) to create smarter, faster and more personalised self–services, along with digital and social media solutions to enhance customer service and engagement. Your airline recently launched India's first native airline mobile app for Windows and Blackberry phones and will shortly launch apps for Android phones and the iPhone.
Today, your airline has emerged as the first Indian carrier to have garnered over one Million fans on Facebook. In the years ahead, your Company aims to use new–age technology to help enhance guest experience, improve costs and productivity and boost ancillary revenues.
The management team and employees of Jet Airways have relentlessly strived through difficult challenges and demonstrated that success happens through hard work, dedication, commitment and team effort. The team has demonstrated its ability and endurance to take tough decisions in the long–term interests of the Company. As a result, your airline has grown towards building a stronger and more resilient framework for the future.
I strongly feel that for the industry to return to its profitable ways and attain self–sustaining long–term growth, there is need to collectively address problems related to high input costs. The need of the hour is for all the stake holders, including the Central Government, State Governments, airlines and airports to join hands and collectively work together to nurture this vital industry back to health.
To conclude, I would like to personally thank the 20.7 Million passengers, who have flown with us during the year ended March 31, 2013 and the shareholders who have continued to repose their faith in us. I am grateful to the aircraft lessors and banks that have financed our aircraft and assisted in re–structuring some of the aircraft leases and loans to reduce costs. I also wish to thank each member of the management and staff of Jet Airways for their loyalty, dedication, commitment and hard work to overcome the adverse conditions that the company is passing through. Together, we can and we will emerge triumphant.