Jet Airway’s auditors sound financial distress call

It appears that India’s largest carrier, Jet Airways, is heading in a similar direction of financial distress like its full service counterparts Air India and Kingfisher Airlines.

A dirty and unwashed Boeing 777 of Jet Airways arrives at Mumbai from London.

Reuters is reporting that Jet Airways reported to the Bombay Stock Exchange that its auditors, in a report dated November 11, have said that there is an crucial need to infuse funds urgently if Jet’s accounts have to be prepared on a “going concern basis” in the future, the company told the Bombay Stock Exchange.

Definition of going concern
Going concern is a fundamental accounting concept. Financial statements are normally prepared on the assumption that an entity is a going concern. Going concern implies that the entity will continue its operation in the foreseeable future. It is assumed that the entity has neither the intention nor the need to liquidate or curtail materially the scale of its operations.

Jet Airways, along with the rest of the airline industry in India is suffering from high fuel costs thanks to excessive taxation, excess capacity, and an aggressive pricing strategy by national carrier Air India.

Jet Airways, posted a net loss of Rs. 713.57 crore for the quarter ended September 30, 2011, down sharply from a net profit of Rs. 12.43 crore during the same period last year. Jet posted a net loss of Rs. 157 crore for the first quarter of fiscal 2011~12. Jet Airways has a declared debt of Rs. 135 billion however its liabilities along with that of its subsidiary JetLite is almost double at Rs. 218 billion. JetLite is considered to have eroded its complete net worth.

One has to seriously ponder why the domestic airline industry, the darling of the global airline industry, and at 17% year on year, one of the fastest growing markets in the world is in such shambles. Is it just external forces? or are internal factors at Indian carriers also to blame?

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About Devesh Agarwal

A electronics and automotive product management, marketing and branding expert, he was awarded a silver medal at the Lockheed Martin innovation competition 2010. He is ranked 6th on Mashable's list of aviation pros on Twitter and in addition to Bangalore Aviation, he has contributed to leading publications like Aviation Week, Conde Nast Traveller India, The Economic Times, and The Mint (a Wall Street Journal content partner). He remains a frequent flier and shares the good, the bad, and the ugly about the Indian aviation industry without fear or favour.

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