Mumbai: India’s largest private airline by passengers flown, Jet Airways (India) Ltd, has decided to stop global expansion for a year starting November, ahead of the global launch of rival Kingfisher Airlines Ltd and in the background of record jet fuel prices.
“We have been expanding rapidly in the last 18 months. Now, we will be focusing on how our international and domestic flights feed each other,” said Sudheer Raghavan, chief commercial officer of Jet Airways, without elaborating on exactly how the airline plans to go about this.
Jet launched its overseas flights in 2004 and has since aggressively expanded its global operations. It now flies to 20 overseas destinations in the US, West Asia, Hong Kong, Singapore, China and Malaysia. State-run National Aviation Co. of India Ltd (Nacil), which runs Air India, flies to at least 35 foreign locations.
Jet’s decision comes in the wake of efforts by Indian airlines to cut costs to remain profitable after passenger traffic on domestic routes fell and jet fuel prices in the country rose 60% in the past year. Since June, these airlines have scrapped almost 15% domestic flights.
Realigning plans: A Jet Airways plane at Mumbai airport. Jet will realign its domestic network in line with its international flights to reduce waiting time for passengers from smaller cities on connecting flights. Photograph: Hemant Mishra / Mint
On international routes, Jet, run by billionaire non-resident Indian Naresh Goyal faces fresh competition. Kingfisher Airlines , promoted by billionaire Vijay Mallya, starts its international operations in September with a Bangalore-London flight. The airline will also start non-stop flights to 13 other foreign destinations, including Singapore, Hong Kong, Pakistan and the US.
“It is pure coincidence that we are stopping our international expansion when Kingfisher is starting,” said a Jet Airways executive who did not want to be named. “But, ours is a well-thought-out strategy, considering the moves of our domestic and international rivals.”
“It’s a wise decision in two aspects. First, Jet Airways cannot shell out more money in the name of expansion, and secondly, it has expanded to a maximum possible limit giving it a first mover advantage,” said a Mumbai-based analyst tracking aviation stocks for a domestic brokerage, who requested anonymity. “Jet Airways has bought maximum international seats available in various (international) routes, resulting from bilateral talks between India and other governments.”
Jet will also realign its domestic network in line with its international flights to reduce waiting time for passengers from smaller cities on connecting flights from metros to foreign destinations. For instance, flights to Mumbai from Pune, Nagpur and Ahmedabad will be rescheduled to coincide with its international flights out of Mumbai, usually between midnight and dawn.
And flights from cities around Delhi, Bangalore, Chennai and Kolkata “would be realigned to complement our international flights. The details are yet to be worked out,” the executive said, adding that the company expects international and domestic operations to contribute equally to revenue. About 48% of Jet Airlines’ revenue came from its international operations in the quarter to June. “This will go up to 50% in coming quarters and remain largely at that level in coming years,” the executive said.
Jet’s Raghavan said the carrier has already changed the timings of various international flights to connect other long-haul flights. For instance, Delhi-Kathmandu flights now connect Delhi-London.
The global aviation business has been slowing after jet fuel price surged to Rs73,673.56 per kilolitre in August in Mumbai, compared with Rs40,388.40 in the year-ago period.
In India, jet fuel costs 60% more than in global markets and domestic airlines expect to make aggregate losses of $2 billion (Rs8,740 crore now) in the fiscal year to March 2009.
Jet Airways posted a loss of Rs253.06 crore for the year ended 31 March, compared with net profit of Rs27.94 crore in the previous financial year.