India’s second-largest airline Jet Airways India Ltd, which is currently cash-strapped as it faces pressure from rising fuel prices, is working to reduce its non-fuel costs and raising its ancillary revenues to sail through the lean phase being currently faced by the industry. Jet Airways reported a net loss of Rs 1,323 crore for the quarter-ended June. Speaking with The Indian Express, the Mumbai-based airline’s vice-president – sales, India, Gilbert George said that in the domestic market, presence of overcapacity of seats was one of the problems affecting the sector.
“In certain markets, like domestic, there is overcapacity, no doubt, and in a poor season the overcapacity stands out very starkly. That’s when the overcapacity hits you bad. But the advantage on the other side is that you are actually growing the Indian market because from a population perspective we have scratched a very small percentage. This allows more people to fly but from an airline perspective, given the fuel prices and the rupee to dollar rate has impacted us. Some kind of pricing initiatives will have to be taken, as the airlines have done, to maintain revenue per flight or better seat factor,” George said. He was speaking at the sidelines of an event announcing the airline’s non-stop flight from Mumbai to Manchester starting November 5.
Despite its poor results, Jet Airways last week announced a sale offering 25 lakh seats at up to 30 per cent discount. When asked if the airline had lost pricing power in a market that was flooded with capacity, George said that the domestic market was going through a lean patch, which is why the airlines were coming up with discount schemes. “From a fare perspective but that’s only transient for this phase and once the season starts from October, there will be some kind of pricing sanity that’s going to happen. Internationally, in fact, yields have improved so we don’t see an pricing impact happening as far as overseas destinations are concerned, especially to the European destinations,” he said.
On the other hand, George pointed out that Jet Airways was working towards increasing its ancillary revenues by de-bundling offerings from its fares. “If you don’t require something, I don’t need to charge you for it but if you require it and it is an essential part for you, yes (we will charge you for it). That is how we are building ancillary revenues,” he said. Monday, SpiceJet CMD Ajay Singh had told this newspaper that it was important for airlines to build upon their ancillary revenues at a time when the sector was facing cost pressures from rising crude prices and depreciating rupee.
Jet Airways, which is expanding into Europe, is currently seeing traffic in the middle-east, one of its key international markets, go through a slump. In February, the company’s chief financial officer Amit Agarwal had said that the gulf market remained depressed and continued to be under pressure.