November 29, 2020

With a favourable market, Jet Airways can fly easy but resource crunch will be a concern

 OCTOBER 26

Sources : www.thehindubusinessline.com

The beginning of the winter schedule from the last week of October should see down-in-the-dumps Jet Airways start performing better even though a shortage of resources will continue to hurt the airline for the next two quarters.

Sources in the airline told BusinessLine that while the situation in the airline is quite grim, the market environment is already getting better from a pricing perspective. One of the reasons for the optimistic scenario is because of the demand-supply balance kicking-in terms of routes.

Money-spinning routes

The full-service carrier’s money-spinning routes are the Mumbai and Delhi metros where as per the winter schedule, the capacity addition is not more than 2-3 per cent. “The capacity on these two routes are not growing much compared with the rest. The ability to manage better yields are more and it will extract better premiums,” sources said.

This will lead to an improvement in RASK (revenue available seat km) for the airline. RASK is obtained by dividing operating income by available seat kms. Higher the RASK, better is the profitability without a corresponding increase in the number of aircraft. As per the latest winter schedule submitted by various airlines, the capacity additions out of Delhi is at about 5-6 per cent and from Mumbai, it is around 2-3 per cent. In certain routes, especially from certain cities from South India, the additions are as high as 40 per cent.

According to sources, the airline is looking at rationalising staff deployment. Its current employee to aircraft ratio is 130:1 down from 150:1 in 2015. Reports suggest with the deployment of more economy seats and reduction of first class seats, Jet Airways can progressively reduce the number of aircraft crew.

Another area which the airline is working on is to reduce CASK (cost per available seat Kms). Jet’s non-fuel CASK is at about 3.12 compared with about 2 for some of the airlines. The airline was able to reduce its non-fuel CASK by 1.8 per cent but with higher fuel prices, its CASK, including fuel, increased steeply resulting in a huge loss for the previous quarter.

The airline sources said, the salaries of General Manager and above which includes pilots were delayed but most of them have received their complete remunerations with 30 days of each month.

‘New approach’

Aviation consultancy firm, CAPA in its mid-year report pointed out that Jet Airways is a powerful brand that has played a pivotal role in the development of Indian aviation, and continues to do so. “It is the only private carrier to have survived from the time that the industry was deregulated in 1993 and cannot easily be replaced.

It is important for Indian aviation that Jet survives and succeeds. This will require time-bound recapitalisation and restructuring delivering meaningful results, combined with a new approach which could include a change of ownership.” The report said the FCCs could lose $1.75-2 billion in FY2019.

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