Mumbai: Jet Airways (India) Ltd is converting one-third of its domestic flights into the all-economy service Jet Airways Konnect to cut costs, increase revenue in a lean season, and beat competition from low-fare rivals.
The move will give Jet Airways 20-25% extra seats, although the yield of every plane will reduce by 10-15% with the loss of the higher-priced business class seats, two company executives said.
It comes nearly two years after Jet Airways launched Konnect as a no-frills service in May 2009—when the economic slowdown was keeping passengers away from air travel— by converting some of its full service flights to the all-economy class.
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Then last September, Jet, India’s largest airline by passengers carried, reconverted most Konnect flights for full-service operations as passengers started returning to air travel on the back of economic revival.
The latest reconversion is happening in the traditionally weak March quarter, when nearly half the air travellers are opting for low-fare carriers such as IndiGo, SpiceJet and GoAir.
The conversion of aircraft from a twin-class configuration—business and economy—into a single class, and vice versa, can be done overnight at minimal cost and without disrupting flight schedules, two Jet Airways executives said.
“We have seats with us when we reconverted Jet Airways Konnect to Jet Airways flight. This will cost very minimum,” one of them said, asking not to be named.
In a conference call with analysts, Jet Airways chief commercial officer Sudheer Raghavan called the flexibility to convert into all-economy class seats “swing inventory”.
The company will be able to raise its revenue for every departure as the average cost per seat kilometre will come down by 30%, including cost savings in terms of catering and flight attendants, the executives said.
“Bringing back Jet Airways Konnect is a clever strategy reflecting the flexibility,” said Rishikesha T. Krishnan, a professor of corporate strategy at the Indian Institute of Management, Bangalore. “I have not heard any such flexible model in the international scene. Jet Airways can easily carry out reconversion as it has those seats with them and cost is not high.”
On 26 April last year, the company launched Konnect Select, an eight-seat semi-business class cabin on all Konnect flights, as business class passengers started coming back after the slowdown.
“Jet Airways has introduced Konnect Select, a semi-business class, to tap premium passengers flying on the routes operated by Jet Airways Konnect. The airline has smartly taken away 24 business class seats and put eight business class seats. With this, the airline can serve business class passengers and get more space for economy class seats,” Krishnan said.
An executive at a rival carrier said Jet Airways adapts itself to the market at no extra cost.
“I must admit that Jet Airways Konnect turned out to be successful even though many had raised doubts. Another reason for reintroduction of Jet Airways Konnect could be high jet fuel prices in the context of soaring crude oil prices,” the executive said on condition of anonymity.
Political turmoil in Egypt over the past three weeks have pushed Brent crude oil prices to $100 (Rs 4,580) a barrel for the first time in more than two years. “Jet fuel prices remained a key concern, and the management stated that a Brent crude price beyond $120 per barrel would make it difficult to sustain business,” Mark Webb and Rajani Khetan, analysts at the brokerage wing of Hongkong and Shanghai Banking Corp. Ltd, wrote in an 11 February note, put out after they attended an investor meet organized by Jet Airways.
Other airlines are also boosting low-cost capacity. IndiGo, the country’s largest low-fare carrier, has added seven flights to its fleet and is acquiring more planes to boost domestic capacity.
SpiceJet Ltd is also expanding on domestic routes. State-run Air India Ltd has started discounting fares in select routes to sell more tickets and counter weak demand.
Graphic by Yogesh Kumar/Mint