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Loss-making domestic ops a challenge for new Jet Airways team

In 2012-13,the losses of the airline from domestic operations has been over Rs 1,100 crore.

Written by Mihir Mishra | New Delhi |
June 27, 2013 9:06:07 am

The biggest challenge facing the new management at Jet Airways,including its recently appointed chief executive officer Gary Kenneth Toomey,will be to ensure that the carrier’s domestic operations turn profitable.

The Naresh Goyal promoted airline,where the Abu Dhabi-based Etihad Airways has picked up a minority stake,makes money on international routes but is heavily bleeding when it comes to domestic operation. In 2012-13,the losses of the airline from domestic operations has been over Rs 1,100 crore,whereas,the international operations fetched them a profit of over Rs 350 crore.

“The new management would urgently need to work towards making its domestic operations profitable. Making Jet Airways’ domestic operations profitable is necessary for the airline and for the domestic aviation industry,” said Kapil Kaul,CEO of Centre for Asia Pacific Aviation,an aviation consultancy firm. Kaul further said that Jet needs to put a business model in place for the domestic operations and put a right framework in place to support it.

Jet operated with three different brands in the domestic market till sometime back. The number has been brought down to two — Jet Airways and JetKonnect — but the airline’s dynamism in pricing the inventory leaves a thin line of difference between a full service and low-cost pricing.

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“They need to get clarity on the model they will follow — low cost,full service or a mix of two — and support it with the right cost of operations. They can not compete with low-cost carriers in offering low fares with their high cost of operations,” he added.

A Jet Airways’ spokesperson did not offer any comment on the agenda of the new management. Not only is the airline making losses in the domestic sector,it is also losing market share in the domestic sector to other carriers. The airline,which was the largest carrier in terms of passengers carried till June 2012,has been consistently losing market share with its market share falling from 26.2 per cent in January to 22.5 per cent in May 2013.

Executives in other Indian carriers,however,feel that Jet’s focus will be more on strengthening international network post the sale to Etihad. “Jet continues to focus on increasing international presence through code shares even as it is losing market share in the domestic sector. The airline does operate with same aggression in the domestic sector and it will worsen further with Etihad coming in,” said an airline executive.

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