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Chairman’s Speech at the 20th Annual General Meeting on August 3, 2012
August 3, 2012
I am delighted to welcome all my fellow shareholders this afternoon to the 20th Annual General Meeting of your Company. 2011 was a difficult year for global aviation. The economic uncertainty in Europe and the sluggish growth in the USA and other economies continue to cause concern. > India’s GDP growth projections have been trimmed down to 6.5% for financial year 2012-13. Political uncertainties due to coalition compulsions, slowing foreign direct investment and a volatile currency have affected the general operating environment. In addition, the continued fluctuations in oil prices and the increase in airport levies and operating costs have impacted all Indian carriers, including your Airline, negating much of the modest gains of last year. Air traffic is expected to grow at twice the GDP growth at 13% in financial year 2012-13. However, despite the external impacting factors, your Company continues to be in a leadership position in the Indian aviation market. With strong leadership and proactive measures to increase revenue and reduce costs your Company is confident to retain its premier position.
At the outset, let me express my gratitude to all of you for your support to the Company. The aviation sector faces turbulence in the wake of economic, political and industrial uncertainty. Your understanding and valuable support reflects your confidence in the strong leadership and management of Jet Airways.
As you would have observed from the Annual Report for the year 2011-12, due to the declining GDP growth of the Indian economy and its adverse impact on travel in general and the aviation industry in particular, your Company has registered a decline in performance. The Management of your Airline is working very hard to continue with measures to counter the general economic slowdown. These measures include review of our route network, sale and lease back of some of our aircraft and implementing strong cost control steps across your Company.
The last financial year has been a tough year. I would like to take this opportunity to encourage our Management team led by our CEO Nikos Kardassis and our devoted employees across our network to continue with their efforts towards further reducing costs and enhancing our passenger and freight revenues.
In this context, I am pleased to report that during the year 2011-12, the proposal by our Management to bring about the brand merger of Jetlite and JetKonnect was implemented and this helped in enhancing revenues. This combined with the introduction of Premiere Class on additional JetKonnect flights has helped improved our revenues, made us more competitive in the low-to-moderate fare segments and also expanded our presence in the premier segment.
I would like to assure you that your Company continues to be focused and vigilant to monitor all factors affecting business, so as to always be ready with plans to counter any adverse impact on our operations. In particular, we foresee continuing pressure on our bottom-line from fluctuations in fuel prices. While oil prices have been softer in the recent period, we do not believe that prices will stabilize at these levels. We trust that the Government will consider it prudent to support the Aviation Industry to reduce the current high sales tax on fuel, which is our single largest cost component. Even if this were to happen, the depreciation of the Indian Rupee vis a vis the US Dollar would cancel out the positive effect of Government support if any, on fuel in the short-term. With your Company’s major costs being designated in dollar denomination, we are watching the rupee/dollar fluctuations with concern, but this situation is beyond the control of your Management.
We continue to place a lot of emphasis in maximizing the yield on our flights. 2011-12 witnessed a steep decline in the domestic yields mainly due to irrational pricing by competition. We have observed that this practice has stopped in the second half of the year, and has contributed to strengthening of the yield. I can assure you that we are utilizing sophisticated tools and techniques at our disposal to maximize the revenues on both our domestic and international flights.
Our efforts are yielding positive results. Your company has shown a significant improvement on the initial projections and reported a profit in the first quarter of 2012-13, thanks to the revenue improvement and strict cost control measures.
Your Company is also working on initiatives which will help unlock the brand value of JET AIRWAYS. In this regard, we are looking to setup a training academy to provide aviation and general service training courses to third parties and other industries. We are also expanding the scope of our Frequent Flyer Program to get in more partners which will not only be rewarding for our Jet Privilege customers, but will also enhance the value of the program. We believe these and other similar initiatives will greatly enhance the overall valuation of the Company as well as maximize shareholder value in the medium term.
Another area that we are working on is to directly reach out to the customer through various improvements in technology such as offering options of self service like mobile, web, kiosks for booking, check in and other transactions. Smart phones and tablets have enabled customers to avail multiple options. Jet Airways will be at the forefront of technology advancements to ensure an even more seamless customer experience.
We will continue our focus on strict cost control during the current financial year. In this regard, we are suspending operations to destinations which have not been profitable in the past and routes where traffic growth has been slowed or declined. Some of the international routes where we have announced pull outs include Mumbai – Johannesburg, Chennai – Kuala Lumpur, Brussels – JFK and Chennai – Dubai. We believe that this strategy will strengthen our focus on the other routes as well as improve our overall performance.
We will continue to invest in routes where we see growth opportunities. In this regard, I am pleased to say that, in support of our Government’s thrust to serve regional markets, our network planning department is actively studying the possibility of redeploying our aircraft assets to serve these markets better.
In the area of service quality, we are increasing our focus on the quality of guest experience across our network. We continue to receive letters of appreciation from our guests for which we are grateful. At the same time we are quick to respond to correct any service defects or shortcomings that are brought to our attention.
With the stoppage of irrational pricing in the domestic market, we expect domestic yields to remain stable. However steep increase in operating costs including high airport levies has negated any sustained positive impact from increased market fares. Therefore, under the leadership of the management team we continue to implement strict cost control measures and undertake continuous process improvements to improve our operating margins. Your Company will continue to review and eliminate loss-making routes, selectively introduce flights into growth markets and focus on developing sources of ancillary revenues, while continuously striving to provide the highest quality of guest experience on ground and in the air. Above all, they are committed to pursue and deliver the Company’s core objective – that of being a safe and reliable airline and the first choice of the business and leisure traveler, with a dominant and highly regarded market profile and presence.
My fellow Directors, the Management of your Company and I continue to be bullish on our future growth and on the expansion of your companies route-network and I can confidently assert that we will spare no efforts to realize our objectives and goals.
In closing, I would like to once again strike a note of caution on the high tax levy on air turbine fuel and sincerely hope that, as reported in the media, these may be rationalized soon. Together with steep airport levies, airline balance sheets have been adversely impacted. This is a burden neither the Airline nor our passengers can afford to bear any longer.
I would like to take this opportunity to express our most sincere gratitude to our valued clients, our loyal Jet Privilege Customers and to our esteemed shareholders for their continuing patronage and faith in our Airline. My sincere thanks go out to the Honourable Minister of Civil Aviation, Mr. Ajit Singh, the Ministry of Civil Aviation for taking significant measures to aid the industry, in particular, the Civil Aviation Ministry’s decision to focus on infrastructure development, open more international routes for private carriers and their ongoing efforts to reduce the taxation on ATF through discussions with the Finance Ministry.
My thanks also go out to Director General of Civil Aviation, the BCAS, Airport Authorities of India, DIAL and MIAL for their constant support.
I would like to express my thanks to our Indian Banks and financial institutions, US Ex-Im Bank, ECAs, our Insurers, our strategic partners Boeing, Airbus, ATR, GE, CFM and Pratt & Whitney and our Lessors for their continued support through these challenging times.
Finally, my gratitude goes out to our loyal staff and each and every member of our Management team for their efforts despite adverse external factors, to sustain high service levels and support the Company with their hard work, dedication and loyalty.
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