Jet Airways Case Analysis Presentation

NOW YOU SEE IT, NOW YOU DON’T
The case of Jet Airways and its Accounting Policies

Presentation Outline
1. Jet Airways - Company Background
2. Airline Industry Background
3. Main Issues
a. Highlights of First Quarter 2008 Results
b. 1st New Policy: Adoption of New Depreciation Method
c. 2nd New Policy: Foreign Currency Exchange Differences
d. 3rd New Policy: Revaluation of Fixed Assets
4. Summary
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Company Background
 India's largest private domestic and international airline
 Promoted by Naresh Goyal, its founder and chairman
 Launched in 1992 and commenced its operations in 1993
 By 2008, operated around 380 flights daily to 64 destinations both within India and overseas
 Went public and was listed at the National Stock Exchange and
Bombay Stock Exchange in 2005

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Airline Industry
 India saw the emergence of many airlines such as Air Deccan, Spice
Jet, Indigo, GoAir, Kingfisher Airlines, etc. after the year 2000.
 Air travel increased in volume with the advent of low-cost airlines
 Turbulence in the Airline Industry
 In 2008-2009, crude oil price hike coupled with global recession led to difficult times for the airline companies
 Slowing down of demand
 Surplus of Supply

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The Main Issue
First Quarter of 2008-09
Increase in net profit: 364%
 Increase in income (sales): 58% (18,066.7 to 28,671.6)
 Net profit after tax: 1,433.8 million from 308.8 million

• Increase Airfares

Revaluate Routes

Restructure

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Accounting Policy Changes

• Depreciation Method

- Change from Written-Down
Value Method to Straight
Line Method

• FOREX P/L recognition
- Gains/Losses from loans denominated in foreign currency is adjusted in B/S instead of I/S

tion l ua

Accounting
Policy

a
Rev

De pre cia tio n

Summary

Foreign Exchange

NOW YOU SEE IT, NOW YOU DON'T: The case of Jet Airways and its Accounting Policies

• Revaluation Model
- Revaluation was accounted in the current period with its full cumulative effect is applied in I/S

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Depreciation Policy