New Delhi: From all
available indications, Jet Airways has sacrificed market share in its
quest for higher revenue yields. Chief Operating Officer Sudheer
Raghavan said in a conference call with analysts this afternoon that
market share is a function of capacity and that the airline has
knowingly reduced capacity on domestic as well as international sectors
by stopping flights on unprofitable routes.
During the September quarter, domestic capacity was down 0.4 percent and international by 2.1 percent.
He also made it clear
that fresh capacity addition will now only happen from April 2013, when
new aircraft are added to the fleet. By September end, the Jet group
(Jet Airways and JetLite together) held just under 24 percent of the
market, behind IndiGo’s 27.2 percent share. But JetLite bore the brunt
of this capacity rationalisation since its standalone market share fell
to just 6.5 percent in September quarter against 8.1 percent in the same
quarter last year. This makes it the least popular low-cost carrier
(LCC) in the market. By September, Jet Airways’ standalone share fell
behind even Air India in domestic market share.
The market share
sacrifice is helping yields and the current festive quarter ending
December augers well for Jet Airways. Not only will the airline reap the
benefit of the second fuel surcharge increase it unleashed on
passengers in late September, but Jet has already seen almost 40 percent
advance seat bookings for November, almost double the bookings it
records in any other month.
So clubbing the increase Jet had announced in August, total fuel surcharge has gone up by Rs 400 per passenger.
Raghavan
said the airline should see a further improvement in yields (revenue
per passenger) and better profitability in the second half of this
fiscal through a mix of capacity rationalisation, rising ancillary
revenues, ‘swing’ capacity between Jet and Jet Konnect as also sale and
leaseback of aircraft.
Does this mean the slowdown in the
domestic airline business is finally reversing, not just for Jet but for
the industry as a whole? Raghavan made it clear that most Indian
carriers have realised the unviability of operating at low fares and
have begun to correct themselves. “Market has reckoned that days of low
yield travel cannot be sustained. There is strong will-power now to hold
on to yields going forward”.
Jet’s own yields increased by a
substantial 34.3 percent in the last quarter versus the September
quarter of 2011 and by 1.1 percent versus the June quarter this year.
Raghavan said typically the second half of any fiscal sees yields rising
by about 8 percent compared to the first half.
The second
largest airline group in the country has been on a cost rationalisation
drive for the last several months and this has reaped rich rewards.
Raghavan said the reduction in the number of expat pilots (who are paid
much more than Indian pilots) was on course and the number had come down
from 207 to 107 in the last six months before settling at 59 by March
2013. This alone has saved the airline $36 million.
Then,
revenues from ancillary services increased 20 percent year-on-year –
meaning money coming in from pre-bookings of meals on board, sale of
merchandise on flights and through Jet’s website, etc. Now, the airline
earns $8 per departing passenger in ancillary revenues. And despite an
over 17 percent increase in fuel costs, cost per ASKM (available seat
kilometre) went up by only 6 percent year on year.
In the current
quarter, Jet plans to have more full service seats by converting a
substantial number of Jet Konnect flights into full-service flights; it
has also reconfigured the 777 long haul aircraft by adding 34 seats in
each (10 abreast now against 9 earlier). Unprofitable routes such as
Mumbai-Johannesburg and Brussels-JFK have been scrapped on the
international leg and the 737 aircraft of these routes redeployed on
starting second service between Kolkata-Bangalore, Mumabi-Kuwait and
Mumbai-Abu Dhabi.
Jet Airways posted a net loss of Rs 166 crore (
Rs 100 crore for Jet Airways and Rs 66 crore for JetLite) for the
second quarter that ended in September, narrowing down it losses from Rs
713 crore for the same quarter last year.
http://www.firstpost.com
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