Jet Airways (India) Ltd. (31-3-2010)

Provisions involving a substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but are disclosed in the notes. Contingent Assets are neither recognised, nor disclosed in the financial statements.

From Notes to Accounts:

As per Accounting Standard-29, Provisions, Contingent Liabilities and Contingent Assets, given below are movements in provision for Frequent Flyer Programme, Redelivery of Aircraft, Aircraft Maintenance Costs and Engine Repairs Costs.

(a) Frequent Flyer Programme: The Company has a Frequent Flyer Programme named ‘Jet Privilege’, wherein the passengers who frequently use the services of the Airline become members of ‘Jet Privilege’ and accumulate miles to their credit. Subject to certain terms and conditions of ‘Jet Privilege’, the passenger is eligible to redeem such miles lying to their credit in the form of free tickets.

The cost of allowing free travel to members as contractually agreed under the Frequent Flyer Programme is accounted considering the members’ accumulated mileage on an incremental cost basis. The movement in the provision during the year is as under:

(b) Redelivery of aircraft:

The Company has in its fleet aircraft on operating lease. As contractually agreed under the lease agreements, the aircraft have to be redelivered to the lessors at the end of the lease term in the stipulated technical condition. Such redelivery conditions would entail costs for technical inspection, maintenance checks, repainting costs prior to its redelivery and cost of ferrying the aircraft to the location as stipulated under the lease agreement.

The Company therefore provides for such redelivery expenses, as contractually agreed, in proportion to the expired lease period.

    Aircraft maintenance costs:

Certain heavy maintenance checks including over-haul of auxiliary power units need to be performed at specified intervals as enforced by the Director General of Civil Aviation in accordance with the Maintenance Programme Document laid down by the manufacturers. The movements in the provisions for such costs are as under:

    Adjustments during the year represent exchange fluctuation impact consequent to restatement of liabilities denominated in foreign currency.

(d) Engine repairs cost:

The aircraft engines have to undergo shop visits for overhaul and maintenance at specified intervals as per the Maintenance Programme Document. The same was provided for on the basis of hours flown at a pre-determined rate.

*Adjustments during the year represent exchange fluctuation impact consequent to restatement of liabilities denominated in foreign currency.