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Konnect is not a response to falling demand

Konnect is not a response to falling demand
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First Published: Fri, May 15 2009. 11 14 PM IST

Changing demands: Jet Airways’ chief commercial officer Sudheer Raghavan.
Changing demands: Jet Airways’ chief commercial officer Sudheer Raghavan.
Updated: Fri, May 15 2009. 11 14 PM IST
Mumbai: India’s leading private carrier by passenger load Jet Airways (India) Ltd last week announced its latest low-fare service Jet Airways Konnect. The new service, positioned as an all-economy, no-frills, low fare segment, is in addition to its already existing low-fare service JetLite (India) Ltd. The move comes at a time when Jet Airways was consistently losing market share to low fare carriers and was tied up in an ongoing legal tussle between Sahara Group (former owners of Air Sahara which later became Jet Lite) over payment issues. However, the sudden announcement of this new segment remains a bit of a mystery for analysts since it is largely the same model as the existing Jet Lite. Sudheer Raghavan, chief commercial officer, clears the air in an interview with Mint. Raghavan, who has been instrumental in launching the new service, says Konnect is not a response to falling demand, but to changing demand on certain domestic Jet Airways routes. He also says that since Jet and JetLite operate under two different permits, it was difficult to transfer assets (routes) to JetLite. Now, he said, Jet is studying new routes for conversion to Konnect services, and will likely announce them by the end of May. Edited excerpts:
Changing demands: Jet Airways’ chief commercial officer Sudheer Raghavan.
Why Jet Airways Konnect when the industry is talking about consolidation and pruning capacity?
Jet Airways led the industry in reducing capacity when we cut 18% of our domestic capacity in November 2008. We also ceased flying to Shanghai and San Francisco in February 2009; terminated our Bangalore-Brussels services also at about that time; and converted all our Boeing 777 services via our Brussels hub to Newark, New York and Toronto to Airbus A330. That represents a 29% capacity reduction on that route. We believe we acted as a responsible member of the airline community to pare capacity with falling demand. On certain domestic routes we saw a dip in our seat factors. The dip exceeded the market decline on those routes. The flagging economy drove companies to reduce travel expenditures drastically. Companies implemented travel policies disallowing business class travel and mandated travel at the lowest fares. Jet Airways Konnect is a flexible and rapidly deployable service designed to respond to these market changes. Jet Airways Konnect is not a response to falling demand, instead it is a response to a changing demand on certain domestic Jet Airways routes.
Konnect’s mission is the same as JetLite? So why not let JetLite do the same?
JetLite is a successful airline with its own network and fleet plan. Its current seat factor is in the mid to high seventies. It has a loyal following of frequent customers. Why take JetLite aircraft from its successful network and redeploy them (on) other routes? It does not make sense to destabilize what is working well. We have no problems on the JetLite routes. Why try and add to all other challenges we face today?
What are the regulatory challenges against launching JetLite flights on the low fare market?
It is not a regulatory challenge to deploy JetLite flights on these routes. But we did not have spare aircraft in the JetLite fleet to widen its network. Since we were not prepared to redeploy JetLite aircraft and potentially destabilize its successful network, aircraft would have to be transferred from Jet Airways to JetLite. That is where the challenge lies as Jet Airways and JetLite operate under two different Air Operators Certificate issued by the Directorate General of Civil Aviation of India (DGCA). We would have required the formal approval of the DGCA to make the asset transfer. Time was not in our hands to pursue the formal process. We considered using Jet Airways aircraft and crew to operate JetLite services on certain legs of a flight. That had its own set of complications; imagine the confusion that would have created among passengers whose journey straddles two legs of a flight, one on Jet Airways and another on JetLite.
Don’t you think that it is a bit confusing for passengers since everything is same for JetLite and Konnect?
I don’t believe so. Their routes are designed not to overlap. The initial booking numbers seem to indicate that the Indian traveller is a sophisticated consumer who can recognize a good deal when he sees one. The booking volumes indicate no lack of clarity in the consumers’ mind.
There are rumours that eventually you will scrap JetLite and therefore you are nurturing a low fare brand. Is that true?
Looking for hidden shadows? Now why would we want to do something like that? We worked hard to revamp and refurbish something that was born out of the Sahara acquisition. It is now a successful airline. It has a loyal following. 20 Boeing 737 aircraft will be delivered over the next two years for fleet modernization and some expansion. With all this going for the carrier, I cannot but help infer that you and your kinsmen are seeing the shadows that you so desperately seek.
Observers claim that this sudden Konnect entry has something to do with ongoing legal tussle with the Sahara Group on payment of JetLite.
The two are not connected. Journalists’ imaginations working on overdrive. You folks should consider authoring fiction novels.
Would you also consider deploying Konnect in metros and international routes? What is the additional revenue gain because of Konnect?
We have seen a 35% increase in bookings on the Jet Airways Konnect routes since they were launched on 8 May. This is against the bookings that we used to get when the routes were operated by Jet Airways. Naturally this comes at a yield decline of about 8%. As you can see, the math there is in the right zone. We are encouraged enough to study new routes for conversion to the Jet Airways Konnect services. We hope to announce them within the month.
What is the kind of market you are targeting for Konnect? Is it also the dip in business class traffic and the economic slowdown that prompted you to start this?
Jet Airways Konnect’s target market segment is the consumer who is seeking low fares without compromising too much on quality and reliability. Many of the business travellers who have been forced to downgrade due to company policy dictates and general belt tightening fall into this category. It also includes those who used to travel with families to their hometowns and leisure spots but have had to cut down due to a shrinking purse. Jet Airways Konnect targets customers who want low fare rates, not the frills but will not compromise on quality and reliability. And guess what, they can continue to earn and burn their Jet Privilege miles! You bet the economic slowdown and the fall in the front end traffic on these routes had a lot to do with our decision to launch the new service.
What are the advantages of launching such product now? And do you also think that you will dilute your full service model by having more low fare flights under Konnect?
It is not about advantages. It is about giving the consumer what he is telling us he wants now. Only 20% of the Jet Airways services operate as Jet Airways Konnect flights. The latter are deployed on Jet Airways routes where we have seen a significant demand for the low fare product. With 80% of its routes continuing to offer a full service, Jet Airways is still very much a full service carrier. The Jet Airways Konnect service is a selective deployment of the low fare economy variant on routes that cannot sustain a full service product.
Your market share is plunging and rival Kingfisher Airlines is transferring more flights to the low fare category. Do you think you can gain more market share through Konnect?
That is certainly the plan. Market share erosion has taken place, but we are still tops in revenue share. When the day is done, it is revenue that walks to the bank. We will protect that and launching Jet Airways Konnect is an integral part of that strategy.
Other than frequent flyer benefits, how will Konnect compete with Kingfisher Red and other low fare counterparts? What will be the fare levels?
That is obvious. The low fare market seeks low fares, and that is what we will give them. Jet Airways Konnect will offer fares that are competitive in the low fare segment. In addition, it is backed by the trust, warmth and reliability associated with the Jet Airways service. We will not abandon our values just because we may match the fares of the low fare carriers.
What is the trend in passenger traffic and what is target in seat factors you are looking at after launching Konnect?
Jet Airways Konnect expects to operate at seat factors exceeding 70%. It used to be around 50% when the flights were operated by Jet Airways.
What is current overlapping rate of JetLite and Jet Airways? Do you think that you would be able to bridge the low fare gap through Konnect?
It is no longer a question of what we think. The Jet Airways Konnect services have been open for booking since 8 May. We have already seen the uptake in bookings. We are confident of its future.
As of now, what has been the response to Konnect?
A 35% increase in bookings. We will be announcing more additions to the Jet Airways Konnect services within the month.
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First Published: Fri, May 15 2009. 11 14 PM IST