Jet Airways crisis benefits IndiGo, SpiceJet and Vistara; intensifies three-way battle between airlines

It has been roughly about 45 days since Jet Airways fully grounded its operations, but the troubles at the airline started even before the formal closure. The core of any airline business is schedule integrity, which means a passenger is counting on flying a certain route at a certain time. With Jet Airways, since January 2019, this was a problem, given the airline was cancelling flights due to their aircraft being repossessed by the lessors.

As the schedule integrity fell apart, business customers started booking away from Jet Airways, which meant business was going the way of all the other airlines in India by the droves as Jet Airways started to fall apart. Jet Airways carried 17.06 lakh passengers in January 2019 (including JetLite). In March 2019, which was the last full month of operations for them, they only carried 6.71 lakh passengers. GoAir, which flew 10.88 lakh passengers in January was able to carry 11.9 Lakh passengers in April 2019.

The spike in full-fare bookings talks about how this helped the finances of the airlines, as customers were left astray by Jet Airways and had to look the other way. As Jet Airways quit on Mumbai – Kolkata and Bangalore – Delhi amongst others, IndiGo saw, for instance, 5 percent of their revenue for April 2019 from tickets in the highest fare bucket for BOM-CCU. This number was 0.11 percent in the month prior.

IndiGo, flying one in every two passengers in India now

 Jet Airways crisis benefits IndiGo, SpiceJet and Vistara; intensifies three-way battle between airlines

Representational image. Reuters

Let’s start with the market leader, IndiGo. As word came about of slot redistribution to other airlines due to the fall of Jet Airways, IndiGo went about adding capacity from Mumbai’s Terminal 2 and Delhi’s Terminal 2. They also added flights internationally, independent of Jet Airways slots. But the airline only added three aircraft in March 2019, and has now resumed their cycle of receiving an aircraft every few days, having added a net of 7 aircraft to the fleet in May 2019 so far.

IndiGo has its own constraints, which it has to tackle to gain the most out of this situation. First, an adequate number of pilots. They have added about 285 pilots from Jet Airways already, but they need to be trained for the IndiGo A320 family and would start to come online in a few months. Secondly, the airline is tackling with the range challenges on the A320neo with the restrictions placed on them due to the Pratt & Whitney engines. Not to forget that they are already clocking 49.9 percent domestic market share as of now.

But IndiGo made good use of the opportunity in the past few months regardless. As per the results of the airline and the comments of the CEO Ronojoy Dutta, the airline saw fares go up in February and March due to the misery of Jet Airways, but they expect this to be a temporary blip on their radar.

SpiceJet, in the right place at the right time

SpiceJet, which came close to its own demise back in 2014, was the best placed to capture this opportunity due to a combination of many factors. The airline saw their Boeing 737 MAX aircraft being grounded as a part of the global grounding of the aircraft type. All of a sudden, the Boeing 737 NG, an older generation aircraft, was back in demand globally, as airlines scurried to lease these aircraft to be able to maintain their summer schedules.

A new requirement created on the go might have helped them turn this adversity into opportunity. The civil aviation bureaucracy in India decided that they would only allocate the Jet Airways slots to airlines which were able to add capacity in a 30 day period, in terms of new planes.

And right here in India, there were over 70 such aircraft in the fleet of Jet Airways, which were being repossessed by their lessors. SpiceJet was the only other domestic operatory flying the aircraft type apart from Jet Airways, so they were able to turn this into an opportunity for themselves to expand out of critical airports such as Mumbai and Delhi.

The government machinery also made it easy for these planes to be reacquired by willing parties, by waiving off the custom requirements for the plane to be exported out of India and imported again for re-registration on the new airline. The lessors also seem to have offered a sweetheart deal to SpiceJet, which has lapped up 30 ex-Jet Airways 737 on short term leases of 12-24 months, and also take on the cost of making these aircraft airworthy again.

Ironically enough, SpiceJet has not added capacity on the flights it is unable to operate due to the MAX grounding, but is fighting it out of Mumbai and Delhi, getting 130 slot pairs out of the ex-Jet Airways pool so far. They have added flights on marquee routes such as Mumbai – Delhi, Mumbai – Goa and others using these slots, while the short term leases mean when the MAX comes back online and they resume delivery of these aircraft, they can return the older generation aircraft to the lessors.

Vistara, get set to shine

Vistara, which positions itself as a premium carrier, but was not able to grow out of Mumbai, which is one of India’s biggest markets for flying, also was able to take benefit of the fall of Jet Airways to grow. As Jet Airways passed into oblivion, the corporate travellers who want to fly a full-service airline shifted to Vistara.

Vistara managed to get slots on the Mumbai – Bangalore, Mumbai – Chennai, Mumbai – Hyderabad and other markets out of Mumbai before they ran into the new guidelines of adding capacity to get more slots. The airline, which had their own aircraft due for delivery from the second half of the year onwards, took a big gamble, and has started the process to induct 10 Boeing 737 aircraft, all ex-Jet Airways airframes, and have also hired about 500 people from Jet Airways to operate and maintain these aircraft. At last count, the dream of Vistara to be a pan-Indian carrier, rather than a Delhi-focussed carrier may be coming true, given they have also received 110 slots from the Jet Airways slot pool.

Again, presuming they got the same good terms from the lessors as SpiceJet did, the 737 fleet decision is a short term bump in the road to get long term slots out of Mumbai and other key markets, and finally have a reasonable network. They are on the right path indeed, given Mumbai – Delhi frequencies have shot up to 14 times one-way daily, which means one every hour. On one of the busiest routes globally, to be able to offer 14 flights a day would mean the corporate traveller would have an option to choose his timings, and hence, stick with Vistara. How the 737 experiment will play out, however, is something to be seen in the days ahead.

The loss of Jet Airways has also created a large pool of unemployed aviation professionals, which may keep the overall aviation salaries stable or drive them lower this year. After all, the Jet Airways staff is looking just to get hired, while the other airlines have no reason to pay more to their existing staff with a large pool on the bench waiting to be recruited.

At the end of the day, the Jet Airways situation has set up a three-way battle between these three airlines. IndiGo is motivated by ruling the skies, while SpiceJet wants to be able to challenge IndiGo’s lead. For Vistara, however, it is about being the credible option for the Full-Service traveller. For everyone else, it is just about waiting and watching. GoAir, Air Asia India and Air India have moved forward on adding some routes, but hardly enough to make a big impact on the scene.

(Ajay Awtaney is a business travel & aviation journalist based in Mumbai, and the founder of the Indian frequent-traveller website Live From A Lounge)

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Updated Date: May 30, 2019 12:13:12 IST