New Delhi: This may sound like a bitter pill for Jet Airways but the airline is now being advised to completely do away with first class seats on international routes to maintain a healthy balance sheet.
It has already begun reconfiguring economy class seating on its long haul flights to 10 seats a row against 9 abreast earlier and now needs to chop off the heavy and loss making front rows of the plane to improve yields further.
Jet reported a modest Rs 24 crore profit in the June quarter this year despite the troubles at Kingfisher Airlines, its key competitor in the corporate market. Its gross revenue per passenger increased by a modest 8.9 percent year-on-year during the quarter but the increase in international gross fares was slightly better at 11.8 percent.
That Jet Airways has been unable to leverage this situation to deliver far greater improvements to revenue and its bottom line indicates a serious structural weakness and analyst projections vary over whether it would be able to report a profit for the full year in March 2013.
So restructuring international operations becomes crucial since about 60% of the airline’s topline comes from overseas flights.
“They (Jet Airways) should do away with First Class in international flights. Not only is it unviable, First Class is diluting the great Business Class offering Jet anyway has on its international flights,” Kapil Kaul of the Centre for Asia Pacific Aviation (CAPA) told Firstpost.
Kaul projected Rs 250-350 crore profit for Jet in FY13 if there is no sudden spike in fuel costs and currency fluctuations remain manageable.
Jet has already begun taking steps to enhance profitability in international routes. It has begun reconfiguring the Boeing 777-300ER aircraft it would use on the Delhi-London and Mumbai-London routes from the upcoming winter schedule where Economy Class seating would increase to 310 from 274 earlier, according to a report in aviation blog Banagalore Aviation. This blog also refers to the eight First Class seats in each 777-300ER aircraft which need to be removed, saying these are “reportedly so heavy that they don’t allow Jet to do Delhi-US nonstops, which the 777-300ER’s less powerful cousin the 777-200ER easily makes for United Airlines.”
CAPA’s Kaul also pointed out that despite Jet having largely got their international strategy right, they unnecessarily held on to some routes such as Mumbai-Johannesburg where they expected South African airline to withdraw. “But that did not happen and ultimately Jet had to withdraw. They have also made some minor changes in their Colombo flights but largely their schedule has been maintained”.
According to the ‘Airline Route’ website, Jet is also planning to expand international operations this winter. So it is resuming four weekly flights between Kochi and Kuwait besides launching three weekly flights between Kochi and Bahrain and a daily service between Mumbai and Sharjah. Daily services will also commence from Delhi to Doha, Abu Dhabi and Dammam.
Not just international routes, Jet needs a major strategy rethink on its domestic business too, says CAPA’s Kaul. He terms the airline’s domestic low-cost strategy as confused, saying “rebranding doesn’t make them low cost. This is a cultural issue, Jet still needs to adjust culturally to the fact that LCC is now a business reality. Now, LCCs account for almost 70% of the market and if AI also gets its LCC strategy right in the near future, the market would turn to be almost entirely LCC.”
Jet has begun charging a small premium along with IndiGo on domestic routes after the slow demise of Kingfisher and on very little capacity addition in the domestic market in the last quarter. But unless it gets the LCC strategy right for its domestic operations, it will continue to suffer at the hands of IndiGo, SpiceJet and Go Air.