Jet Airways: Out Of The Clouds

Jet Airways is the second-largest airline in India, after IndiGo — both in terms of market share and passengers carried. For Jet Airways, 2015 has been an eventful year in which it not only posted profits in successive quarters, but announced the expansion of its international services.
Of course, the company, which has been making news for frequent changes to its top management, continued with the trend when its current chief executive officer Cramer Bell stepped down after being in office for little over a year. Jet operates over 300 flights everyday to 74 destinations worldwide from its main hub at Mumbai and secondary hubs at Bengaluru, Chennai, New Delhi, Kolkata and Pune.

Posting Profits
A continued slide in oil prices helped the airline post profit for the first quarter ended June to the tune of Rs 222 crore as opposed to a net loss of Rs 218 crore in the same quarter a year ago. It also saw a 21 per cent jump in passengers carried in the first quarter. Naresh Goyal, chairman of Jet Airways, says: “All the major key performance indicators have shown progress as we continue to focus on customer satisfaction, network enhancement and improvement through efficiency.”
Despite a growing demand for air travel in India, Jet had not made an annual profit since 2007 as it was dragged into the red by high operating costs and fierce competition for passenger fares. Jet, 24 per cent-owned by Abu Dhabi’s Etihad, had announced a cost-cutting plan in 2014 and had said it expected to make a full-year profit in 2017. It is on track currently as it again posted a profit of 25 per cent for the second quarter ending September.

Aviation fuel costs fell 27.6 per cent to Rs 1,336.6 crore in the September quarter from Rs 1,846 crore in the year earlier. Fuel costs, which add up to 45 to 55 per cent of an airline’s revenue, have fallen over the past year, allowing most local carriers to improve profitability.

Robust Growth
According to Goyal, the Indian domestic aviation market is witnessing a robust growth with traffic growing by 20 per cent. “Our financial performance in the second quarter clearly demonstrates that our efforts are showing positive results,” he had said after the second quarter results.

Jet Airways’ domestic capacity grew by 16.6 per cent in the second quarter, while passenger numbers grew 34.5 per cent. In a statement, Jet Airways said it continues to enhance synergies with strategic partner Etihad Airways and others. These efforts are aimed at achieving overall benefits across the business and providing greater connectivity and choice to the passengers. The two airlines together now offer more flights to and from India than any other airline, with a 17 per cent share of the country’s international air travel market.

For international travellers, Jet Airways has recently announced the launch of daily non-stop services between India and Amsterdam. From 27 March 2016, Jet Airways will run two daily non-stop flights to Amsterdam Airport Schiphol, one each from its home hubs in Mumbai and New Delhi. Jet Airways also plans a daily flight from Toronto to Amsterdam. These flights will be available for sale across booking channels from 15 December 2015. Jet Airways will deploy its Airbus A330-300 aircraft with 34 seats in Premiere and 259 seats in Economy on these routes.
Cramer Ball, who announced that he will step down by February-end as CEO, Jet Airways, had termed this a significant step for Jet Airways. The two daily flights from India to Amsterdam are to facilitate further growth in business and tourism between India and the Netherlands. With the objective of providing convenient connections for its guests to key destinations across Europe and North America over Amsterdam, Jet Airways has entered into a strategic agreement with KLM Royal Dutch Airlines and Delta Air Lines under which Jet will code share to 30 European destinations for travel between India and Europe via Amsterdam. It’s subject to government approvals.

Unwelcome Exits
But the announcement of Ball having resigned as the CEO of Jet Airways (India) and the news that he will join Italy’s national airline Alitalia as CEO has not helped investor confidence. Frequent exits of CEOs at Jet is nothing new. Ball spent 15 months at Jet Airways, while his immediate predecessor Garry Kenneth Toomey had stepped down after seven months having taken charge of Jet Airways in mid-June 2013, following the resignation of Nikos Kardassis, who left the airline after serving his second term as CEO from October 2009 to May 2013. Kardassis had earlier headed the airline between 1993 and 1999.

Kapil Kaul, CEO, (South Asia) CAPA, said he was not surprised that Ball quit but cautioned that management stability at the top was challenging for the carrier as it increased strategic risk. “I don’t see a structural turnaround possible with continuing management churn at the top,” he said recently.

ashish.sinha@businessworld.in
@ashish_BW

(This story was published in BW | Businessworld Issue Dated 11-01-2016)