Sunday, May 11, 2014

Jet Airways plans to shun loss-making routes, some domestic stations

Jet Airways will add more flights from Indian cities via Abu Dhabi, where Etihad is based, to boost profitability 


Mumbai: Jet Airways (India) Ltd, India’s second largest airline by passengers carried, is paring domestic operations as it piles up losses because of high operating costs and intense competition. 

The airline promoted by Naresh Goyal, which sold a 24% stake to Etihad Airways PJSC last year, is in the process of shutting some domestic stations and pulling out from loss-making routes, according to two airline executives.

Jet Airways is focusing on adding more flights from Indian cities via Abu Dhabi, where Etihad is based, to boost profitability, they said.

“We had closed three domestic stations, including Tirupati, Visakhapatnam and Vijayawada (all in Andhra Pradesh), as part of rationalizing domestic operations. We are moving flights where demand is. For instance, we will add more flights in Mumbai-Delhi sector,” said one of the two executives, who requested anonymity.

Instead, the airline is planning to strengthen its low-fare unit JetLite (India) Ltd to compete with existing peers and new entrant AirAsia India. The parent, which is a full-service airline, will focus on metro routes, competing with state-run Air India and the new airline promoted by Tata Sons Ltd and Singapore Airlines Ltd.
Jet Airways declined to comment.

Jet Airways reported its fourth straight quarterly loss of Rs.267.89 crore for the three months ended December, considered the peak season for domestic airlines because of festivals and holidays in the period. Domestic operations accounted for a major chunk of the loss, at Rs.259.7 crore, as against a net profit of Rs.10.5 crore in the corresponding quarter of last year.

International operations reported a loss of Rs.8.2 crore. The share of Jet Airways’ domestic revenue in total revenue was around 43% in the quarter. The airline also warned of continuing weakness in the March quarter, which is typically a lean season for the airline industry. Competition is intensifying with Tata Sons Ltd teaming up with Singapore Airlines Ltd (SIA) to launch a premium airline, and with AirAsia Bhd to start a low-cost carrier.

“What would the ideal way forward be for Jet? To get a capital infusion from Etihad, buy more wide-body aircraft and expand its international network to take on the storm of Tata-SIA that’s coming up,” said Bharat Mahadevan, who until recently was regional manager for north-east Asia at Jet Airways.

He said Indian passengers who travel overseas make for a huge market and will not eat into Etihad’s share.

“The domestic market anyway has become a low-cost commodity market where it’s tough for Jet to compete with its cost structure. But this doesn’t seem to be Etihad’s plan for Jet,” Mahadevan said, referring to the option of Jet becoming an airline focused on international routes.

The second person quoted above, also requesting anonymity, said Jet Airways was not cutting domestic flights to add to international flights. But Jet Airways is adding more cities connecting Abu Dhabi, the hub airport of Etihad Airways, he said. At present, Jet Airways is connecting Abu Dhabi via three points, and this will go up to six to eight in the winter schedule.

“We had two to three codeshares with Etihad Airways, but now have over 20 codeshares connecting various destinations from Abu Dhabi,” he said. He added that Jet Airways was also adding more flights to other West Asian markets.

According to Mahadevan, Jet is heading in the direction of becoming an airline that will carry passengers from India for Etihad to transport them from its Abdu Dhabi hub, feeding the UAE airline’s extensive US, European and African networks. Etihad’s flights to India will provide passengers for Jet to carry to smaller cities. Mahadevan said this was not a profitable proposition for Jet.

“Moving forward, there will only be two full-service carriers in the domestic market in India—Air India and Tata SIA. Jet will be reduced to a feeder to Etihad,” said Mahadevan.