Mumbai: Jet Airways (India) Ltd, the country’s largest airline by passengers carried, is taking a slew of measures to cut costs, including selling and leasing back as many as five planes in the July-September quarter, according to two airline executives.
The sale-and-leaseback is likely to fetch the airline at least $50 million (around Rs 275 crore), said the executives, who declined to be named.
“We are also planning to phase out more than 100 high-cost expatriate pilots in this fiscal to cut costs,” said a senior Jet Airways executive, requesting anonymity. Jet Airways has around 200 expatriate pilots.
The Naresh Goyal-controlled airline, which posted its fifth straight quarterly loss in the three-months ended 31 March, suspended its money-losing Mumbai-Johannesburg flights from 11 June and is planning to temporarily stop the Brussels-New York flights starting 10 September. It is also planning to cut some of its short-haul international routes. In a bid to make up for declining sales, the airline also plans to shore up its ancillary revenues from 3% to 9% this fiscal. This includes revamping its on-board sales programme, charging passengers for buying tickets through credit cards, raising penalty for cancellation of tickets and reducing travel agent commissions to 1% from 3%.
Disney India and Jet Airways have teamed up for a campaign in which the winners get a free two-day trip to Jong Kong’s Disneyland on a Disney-themed plane
Besides, Jet Airways had struck a deal with Godrej Properties Ltd to jointly develop a plot of land in the Bandra Kurla Complex business district in Mumbai. As part of the transaction, the airline will get an upfront payment of Rs 500 crore, which will help reduce its debt.
Company executives said the airline is also renegotiating contracts with vendors and is seeking more time to pay for jet fuel purchases from oil companies. The second Jet Airways executive said the airline may tap the market to raise some funds once the secondary market becomes conducive to capital raising.
Jet Airways on Monday signed a 10-year agreement with GE Aviation that expands the engine maintenance, repair and overhaul coverage to include new CF6-80E engines that will power nine additional Airbus A330 aircraft that the carrier will begin inducting later this year. The agreement is valued at $150 million. Jet Airways currently operates 10 A330-200 aircraft powered by CF6-80E engines that are covered with an OnPoint solution agreement from GE.
Jet Airways has been attempting to raise $800 million from the capital market for the past eight years.
Manish Dureja, vice-president of marketing at Jet Airways, said the flexibility to increase ticket prices is limited. “There is very little scope to increase ticket revenue. Therefore, we will have to look at all options of non-ticket revenue. Globally, all airlines put together earned $33.5 billion in ancillary revenues in 2011 and it is growing by 8-9%. Jet Airways earns $3-3.5 per passenger as ancillary revenues. We are aiming at taking it beyond $8,” Dureja said.
He said the airline has started charging for printouts of tickets if a passenger is not carrying the same and started charging a small convenience fee for booking through credit card besides increasing the penalty charges for ticket cancellations and changing travel plans to shore up non-ticket revenue.
Dureja said Jet Airways has formed a partnership with Walt Disney Co. (India) Pvt. Ltd for lending aircraft exteriors for special branding exercises to boost revenue. In January, Jet Airways aircraft displayed ads of Nokia’s Lumia 800 smartphone.
The second Jet Airways executive said his company is selling planes because they are less productive compared with the new ones and the airline can take the money now and reduce its debt.
He also said the airline has not cut strategic routes and by redeploying aircraft Jet Airways has increased aircraft utilization by almost 5%. “We are much more nimble and adapt quicker to a changing environment,” he said.
“We believe the street is underestimating Jet’s potential for earnings improvement,” Joseph George, an analyst at India Infoline Ltd, wrote in a report dated 4 June.
On Monday, shares of Jet Airways rose 0.99% to end trading at Rs 388.90 on BSE. The exchange’s benchmark Sensex declined 0.74%.