Jet Airways of India To Enhance Capacity Utilisation, Absorb JetLite

One of the important performance parameters in the aviation industry that also have a bearing on cost calculations is capacity utilisation. This refers to the ability of an airline to use its fleet in the most optimal way to maximise its revenues. By doing so, airlines obviate the need to invest more in the purchasing aircraft. Jet Airways of India has made a declaration to increase its capacity utilisation of Boeing 737 for the same purpose.

The carrier currently uses this model to fly on domestic and some international routes. With the domestic traffic growing at over 20 percent, it felt a need to gain new customers by increasing the frequency on the existing routes and adding new ones. The carrier currently has a fleet of 116 aircraft that includes single-aisle Boeing 737s and 777s, and Airbus A-330s. While the airline has ordered new models, these will be replacements for some of the older ones. As a result, the fleet size will not increase; hence, a need to increase their utilisation was felt. To meet this, the company is set to hire 400 pilots in the next 18 months.

JetLite Merger

JetLite, the former low-cost subsidiary of the airline, is to be merged with the parent company. The approval of equity shareholders to this effect has been granted. It is noteworthy that the board of directors of the two companies had moved to merge the two entities, way back in September, 2015. As per the terms of engagement, the equity shareholdings of the two will be cancelled without any financial gain. The flying permit of the LCC will be retained, and it will be operated as a separate division of the parent airline. As a result, by booking flight tickets with the subsidiary, passengers will be able to enjoy the same luxury as on the primary carrier.

In terms of passenger market share, the two companies together hold about 20.9 per cent, which is the second highest after IndiGo. Combined synergies are also expected to reduce costs and improve the passenger load factor, which signifies the seat occupancy rate. As JetLite is a full-service carrier now and is engaged in route planning and cross-selling with its parent company, this merger will give a higher level of efficiency.

With these strategic decisions to enhance the operational efficiency, Jet Airways of India is aiming to increase its passenger market share and revenue.

Impact of New Rules on Air Ticket Fare

Technologies used in the aviation industry, including ingeniously designed engines, navigation tools and in-flight amenities have been replaced with new ones. Earlier, most of the metro cities were served by various airlines, but now flights to Bhopal, Varanasi, Lucknow and many other II as well as III tier cities can be availed as well. In addition to this, management strategies have also been revised to meet the dynamic market challenges and this is the reason that some changes are needed in aviation rules also. Although, a number of new regulations have been introduced, but old ones can also be seen revised in the coming months.

In response to issues regarding licences to Malaysia-based AirAsia and soon to be launched Vistara for global operation, the Federation of Indian Airlines (FIA) commented on the 5/20 rule. As per this rule, every airline set up in India needs to have a fleet size of at least 20 aircraft and must complete 5 years of operation, then only licence for international operation will be given to it. However, FIA, formed back in 2006 by Air India, SpiceJet, GoAir, IndiGo and Jet Airways, resisted this policy and said that it needs to be changed. A few months back, this law was asked to be waived off, but the Directorate General of Civil Aviation (DGCA) kept it intact.

However, one of the DGCA ministers said that no other country follows this rule; hence, it can be removed from the list pre-requisite conditions. The relevance of this law has been lost because of increased safety standards and application of the latest technologies as well as attempt of global operators to cater niche markets of various countries. The Associate Chambers of Commerce (ASSOCHAM) also released a paper mentioning that this policy of government has no logic in the current market scenario. This policy was drawn almost a decade back, and many new carriers have entered in the industry since then, as well as the country has undergone significant changes regarding air travel demands, since then. Today, air ticket fare is almost half of what it used to be 10 years back.