Mumbai: Three years after acquiring Subroto Roy’s Air Sahara and renaming it JetLite, Naresh Goyal’s Jet Airways (India) Ltd is proposing to bring it under the Jet Airways Konnect brand name as part of the carrier’s strategy to strengthen its identity.
Konnect is the no-frills, all-economy service of Jet Airways, with which it shares planes and personnel.
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JetLite, which currently operates as a low-fare carrier, will fly as Jet Airways Konnect under the plan.
Jet Airways, the country’s largest airline by passengers carried, last week applied to the regulator, Directorate General of Civil Aviation (DGCA) to permit the carrier to enter into a franchisee agreement with JetLite to use the Jet Airways Konnect brand on the low-fare unit’s planes, according to two government officials who didn’t want to be named.
According to one of the officials, the move is aimed at reducing the number of brands operated by Jet Airways and avoiding confusion among passengers.
JetLite will remain as a legal entity, a shell company that will continue to own the planes that will be operated under the Jet Airways Konnect name.
“Though the air operating licence will be with JetLite, the planes will be rebranded as Jet Airways Konnect. The livery of the JetLite aircraft and uniform of the cabin crew would be the same as that of Jet Airways. However, a decision on the approval is yet to be finalized,” he added.
Jet Airways will continue to offer full services—first, business and economy classes—while Jet Airways Konnect (including JetLite operations) will provide all-economy, low-fare services.
This move, if approved by the regulator, will also help Jet Airways avoid overlapping flights on some routes.
“Jet Airways Konnect was formed in a hurry” in May 2009, said a consultant to domestic airlines, on condition of anonymity. It had been set up to respond to a slowdown in passenger traffic in the wake of the economic slump of 2008.
The proposed changes will allow the company to transfer flights from JetLite to Jet Airways, which can’t be done now because of regulatory issues, said the consultant, who isn’t advising Jet. This will allow Jet more flexibility over flight plans, he added.
“Jet Airways Konnect is a better brand compared to JetLite. And most important is that the confusion of three brands would be over,” he added.
Director general of civil aviation Nasim Zaidi could not be contacted despite repeated calls and text messages. A spokesperson for Jet Airways said she wasn’t aware of any such development.
India’s aviation industry continued its robust recovery with domestic passenger traffic growth of 20% in the April-August period from the year earlier, according to a September report by ICICI Securities Ltd. This was driven by strong macroeconomic growth and stable crude oil prices.
Ever since the deal to buy Sahara Airlines—which operated Air Sahara—was reached in April 2007, the two sides have been wrangling over the acquisition price. The initial price for Air Sahara was Rs 2,000 crore, but the two companies renegotiated the deal and eventually settled at Rs 1,450 crore.
Sahara India filed an application with the Bombay high court on 26 March 2009, claiming Jet Airways had defaulted on payments towards the purchase of Air Sahara and sought the court’s permission to seize Jet’s assets.
Akil Hirani, managing partner at Majmudar and Co., a leading law firm, said he does not see any legal hurdles to the proposed Jet Airways move.
“If DGCA does not have any restrictions in this matter, then this can work. As regards impact on the dispute with Sahara, it will depend on the contractual agreement between the parties,” he said.
The industry isn’t new to name changes since it has already undergone a wave of consolidation.
“From a financial impact perspective, there is only the cost involved in communicating the brand, changing the livery, and carrying out back-office IT (information technology) related and ticketing changes,” said Mahantesh Sabarad, senior vice-president (equity research) at Fortune Equity Brokers (India) Ltd.
“Such changes have happened in the past, like Air Sahara to JetLite, Air Deccan to Kingfisher Red, ModiLuft to SpiceJet, etc. From the marketing perspective, half the work seems to be done as people have accepted the Konnect brand already,” he added.
Jet Airways shares fell 2.83% on the Bombay Stock Exchange on Thursday to Rs800.50 apiece. The exchange’s benchmark Sensex index lost 0.32% to 19,941.04 points.
Brand consolidation isn’t always necessary to take advantage of expanding business opportunities, according to Ramesh Jude Thomas, president and chief knowledge officer at Equitor Management Consulting Pvt. Ltd, a leading brand value management firm. He cites the examples of Cathay Pacific-Dragonair and Singapore Airlines-SilkAir.
“I would suggest that they keep the Jet Airways and JetLite (brand names),” he said, since Konnect may not have the same association.
“The Jet Airways brand was defined by a class of service that India was only familiar with in the context of five-star hospitality like the Taj or the Oberoi, namely a Western eye for detail combined with Indian and oriental warmth,” Thomas said. “This is why their international operations continue to exceed both customer and performance expectations.”