Hard times to continue for Jet Airways into 2010

India’s aviation industry is expected to report losses of US$1.5 billion in 2009. That makes up 42% of total losses in the Asia Pacific region. The International Air Transport Association (IATA) has said that “logically most of these losses will come from Air India”, but what do these predictions mean for the premium carriers, such as Jet Airways?

It is safe to say that 2009 has been an ‘annus horribilis’ for the aviation industry as a whole, but Jet Airways has had to contend not just with falling passenger figures and rising debt, but also with staff walkouts, subsequent flight cancellations and the resignation of its CEO, Wolfgang Prock-Schauer.

A number of moves have been made in an attempt to trim the airline’s massive net debt, which is reported to be in the region of $3.1 billion and the withdrawal of economically unviable routes, capacity cuts, aircraft leasing, a recruitment freeze and salary reductions, have all been applied to the airline’s business strategy. But, according to Jet Airways general manager for Dubai and the Northern Emirates Shakir Kantawala, the measures have already begun to show results, and the aggressive strategy will continue well into 2010, he says.

Of particular significance to the survival of Jet Airways has been the introduction of its no-frills service, Jet Airways Konnect, earlier in the year. The Jet Airways Konnect service capitalises on the downshift in demand to economy travel on several domestic routes. In fact, Jet Airways, which controls a quarter of India’s aviation market, directs 70% of its traffic to the budget service, resulting in a 2.5% rise in seating capacity. Currently, the business runs 27 planes on the Jet Konnect routes and the outlook is bright. Domestic traffic recorded a global rise of 4.4% in September, according to the latest figures from IATA.

Story continues below

Advertisement

FEATURED COMMENT Please click here to comment on this article

Kantawala does not stipulate precisely how long Jet’s business strategy will continue to favour the low-cost market, but says that the flexible, all-economy, no-frills solution enables the airline to react quickly to market changes. “We will only re-introduce our premium services – a twin class configuration - on these routes if demand picks up.”

Enhancing connectivity through codeshare and interline alliances is also being considered. Indian airlines reeled under mounting losses as demand waned in the wake of the financial crisis last year and high operating costs have forced them to look at fundraising options. Jet and Kingfisher Airlines – which launched flights to Dubai in June this year – continue to consider forming an alliance, Kantawala explains. “The two airlines have, so far, only concluded interline agreements, as are the normal practice in the aviation industry, but there are on-going discussions.”

When it comes to Jet’s Dubai service, Kantawala is indignant that load factors remain at an “impressive” level and he insists that the Middle East is one of Jet Airways most important markets.

“The long-term potential of the aviation industry in both India and the Middle East is good. However, the current economic downturn, global competition, and the ailing health of the aviation industry in general, may pose a few challenges, and more so in India where airlines have to deal with overcapacity and infrastructural constraints.”

The company says it expects to see yield improvements, given the peak season as well as premium demand revival, during the next few quarters, and its focus will be on maximising revenues through higher seat factors. Its low-cost Konnect service has consistently registered load factor percentages in the high 70s, indicating that the firm’s future, and survival, could indeed lie in low-cost travel.