Airlines need to further rationalize capacity

Airlines need to further rationalize capacity
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First Published: Tue, Jun 09 2009. 09 57 PM IST

View from the top: Jet Airways’ Saroj Kumar Datta says foreign airlines will invest in Indian carriers only to get a share of the local market, not to improve the calibre of the airline or infuse capi
View from the top: Jet Airways’ Saroj Kumar Datta says foreign airlines will invest in Indian carriers only to get a share of the local market, not to improve the calibre of the airline or infuse capi
Updated: Tue, Jun 09 2009. 09 57 PM IST
New Delhi: Last year was bad for the country’s airlines and this year promises to be worse. Some airline executives have said a change in government rules to allow foreign airlines to pick up stakes in Indian airlines may be one way to address the issue. Others have asked for the government to cut taxes on jet fuel, and for direct sops.
Saroj Kumar Datta, 69, the executive director of Jet Airways (India) Ltd, says the government should do its bit, however, the airlines need to cut capacity further as the capacity cuts made last year had already been nullified by the continuing drop in passenger traffic. Edited excerpts:
View from the top: Jet Airways’ Saroj Kumar Datta says foreign airlines will invest in Indian carriers only to get a share of the local market, not to improve the calibre of the airline or infuse capital. Madhu Kapparath / Mint
What do you have in mind in terms of the policies of the new government?
It’s not a question of us having anything in mind. We have presented enough material over the years to the ministry. You know those things—fuel (rationalization of sales taxes on aviation turbine fuel), everything...
And asking for foreign investment in Indian carriers...
It’s government policy. At least, I don’t personally believe that it will do any good to the industry by itself... First, who is going to invest in a loss-making company? And the only reason anyone wants to invest will be because (they want) to get a share of the Indian market rather than to improve the calibre of the airline or to provide capital.
Indian airlines are loaded with debt and are losing a lot of money. What is the way to correct this?
One of the fundamental things is (that) there is an enormous overcapacity. The market has seen a continued drop, load factors are in mid-60s or 70s (per cent) for the industry, so, inevitably there is an overcapacity. There is probably 38-40% overcapacity. Our break-evens are now in the mid-80s or at least in the low-80s (per cent). On top of that, airport charges go up, ground-handling charges go up, fuel prices continue to show an upward trend, etc., etc. How do you reduce cost further? There is a point beyond which you can’t reduce staff, you can’t cut salaries. Airlines have to get to individually decide and bring capacity down to a level, which makes operations viable.
Airlines and airport managers have had several meetings with the government on the ground-handling policy. What has been the outcome?
All of us have a lot of brand impact of doing ground handling—that is what differentiates Jet Airways from an Air India, a Kingfisher or an IndiGo or a whatever it is. And to take away that ability to make an impact on customer is not right. Additionally, we also believe that it becomes more expensive when we go to a third party because it’s a monopoly. Even if there are two of them, it is a duopoly; they can always work together, indirectly to make sure the pricing is not fair. We, therefore, would like the policy to be revised and not implemented (in its current form). In fact, (they should) allow airlines to do ground handling.
How many Jet Airways employees are likely to be affected because of the government’s policy that says airlines can’t do their own ground handling?
We have about 2,700-2,800 (employees) all over the system. No, I am not talking about what you call unemployment that much. Where will these agencies (that have to manage the ground handling now) get people from? They are bound to take some employees from some of these airlines. The issue is: people have worked with us for 15 years, they have done a good job. What do I do with them? And people may not like to join them (the ground-handling companies).
Has JetLite dragged down your overall performance?
The JetLite losses...have been substantially reduced; a lot of integration has taken place (between Jet and JetLite). It has taken longer, (but) a lot of effort has gone into it, to improve performance. Jet Airways’ losses can’t be blamed on JetLite. If things have not improved (with JetLite), I can understand.
You had leased out some aircraft in West Asia and some of these leases will be running out. Are you renegotiating to lease them out further?
There are today nine widebody aircraft on lease—seven Boeing 777s and two Airbus A330s. In October-November (the lease ends), but we are talking to various people to see what can be done (to lease them out again).
Is there any progress on the Jet-Kingfisher alliance?
It’s progressing. Some sharing of resources (has taken place). There are various issues being discussed.
And the code-sharing between the two carriers?
That’s one of things being looked at.
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First Published: Tue, Jun 09 2009. 09 57 PM IST