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.
Published Date: Nov 05, 2012 04:35 pm | Updated Date: Dec 20, 2014 01:24 pm