Jet Airways' revival plan: Kill low cost JetLite, launch more international routes

Jet Airways, which registered a narrower Rs 217.6 crore loss in April-June, is betting on cost cuts and the launch of more international routes to return it to profitability by 2017

FP Editors August 12, 2014 12:40:15 IST
Jet Airways' revival plan: Kill low cost JetLite, launch more international routes

Finally, Jet Airways seems to be getting down to business. The airline, which did not make any annual profit since 2007, has decided to scrap its low cost low-cost brand JetLite to concentrate on its full-service operation.

The company, which registered a narrower Rs 217.6 crore loss in April-June, is betting on cost cuts and the launch of more international routes to return it to profitability by 2017, Reuters reported.

"We as an airline confused customers (with multiple brands) ... The main aim in the tie-up will be to increase market share," Jet Chairman Naresh Goyal said at a press event after the release of the company's first-quarter results.

Jet's low-cost carrier JetLite, which operates 11 aircraft, will now bear the main airline's branding, Goyal said, without elaborating on whether the changes would result in job losses or alterations to the size of the fleet.

The company's aircraft will now be split between economy and business class seats but the airline's pricing will remain competitive despite the scrapping of the low-cost carrier, said James Hogan, chief executive of Etihad Airways, which owns a 24 percent stake in Jet.

Shares in Jet, which have fallen about 15 percent this year, closed up 0.9 percent on Monday, in line with the Sensex.

Firstbiz earlier reported its auditors had suggested the company's ability to continue as a "going concern" depend on deeper synergies with Etihad Airways and its ability to raise funds in the future. What the auditors meant was the company is likely to be in deeper trouble unless its partnership with Etihad works out, more cash flows are generated by the Jet Airways' management and JetLite is offloaded. With the latest development, the company seems to be falling in line.

Jet has been steadily losing market share last few months in the domestic market but now, an even tougher operating environment could develop as two new airlines arrive on the scene. This could put pressure on fares and make a turnaround that much tougher for Jet Airways.

The company has acknowledged the fact that "entry of new airlines will directly increase competition and will lead to more pressure on some routes".

"However, steps have been taken to mitigate the impact on Jet," it has assured in the annual report.

However, as the Firstbiz article noted, JetLite is not the only trouble staring Chairman Naresh Goyal in the face. His beloved airline is already seeing increased competition from the two new Tata airlines exerting pressure on fares on some routes.

The trouble spots still seem to be working capital requirements, reining in costs and fighting increased competition from domestic competitors. The pertinent question is whether Jet has the capability to rise to these challenges, the article noted.

With inputs from Reuters

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