Cutting cost still top of the mind for Jet Airways; fare hike possible
18 Oct 2008
Mumbai: Jet Airways has said the entire episode of first firing and then reinstating 1,900 of its employees as bad business practices and wrong planning.
The Times of India quoted the airline's executive director Saroj Datta as saying, "Yes, it was wrong planning. We all (airlines) did bad business".
The airline is now mulling various strategies to manage its finances, while clarifying that there would be no salary cut for the reinstated cabin crew, even though its options include a salary reduction program on a "voluntary basis" amongst other ideas.
Reports suggest that fares for Jet Airways flights going up is a realistic possibility, as the airline is finding it practically impossible to break even in the current scenario. Reports quoted unnamed sources as saying that the airline would have to charge fares that ''make more economic sense".
Other options include not hiring new staff, and allowing the contracts of expatriate pilots to expire. The hiring freeze at Jet Airways could soon become official, as the airline looks to trim costs. The airline is also mulling the idea of giving its aircraft on lease, and pull back from expansion plans in the international sectors servicing Shanghai and Singapore.
The Times of India quoted Datta as saying that the capacity expansion by airlines was what did them in, as airlines lowered fares in the absence of adequate load factors to address capacity. What happened subsequently with lowered fares was that the break even point climbed even higher, leading to a typical Catch 22 situation. Datta also told the newspaper that the hiring spree Jet had undertaken as part of its expansion plans is what resulted in the airline having surplus people at this point. The changes in the industry and economic environment have forced the airline, which was earlier looking at expanding, to now think of reducing costs by stalling those very expansion plans.
Reports in the media quoted unnamed sources as saying that Jet would most likely as its top management to take pay cuts, but would leave the lower end of its hierarchy relatively untouched, while hoping for volunteers to follow the example of the top management.
Naresh Goyal, announcing the reinstatement of the sacked staff had not spoken of any pay cuts, except a passing mention that the Jet "family would sit together" and decide profitability.
Meanwhile, the Jet-Kingfisher alliance is already under the government scanner for being a cartel. Civil aviation minister Praful Patel has been reported as having said that he has asked the Directorate General of Civil Aviation (DGCA) along with other concerned agencies to keep a watch on the alliance.
He said the alliance would not be allowed to act like a cartel, and that the government would come down with a heavy hand if the two airlines try to do so. His comments follow a widespread feeling in the aviation industry that the alliance would reduce flights and hike fares to levels that others players would have to follow.
While Jet is reported to be planning reducing its 10 Boeing 777s which are on long haul routes to US via Europe to half that fleet size, Kingfisher has decided against accepting the deliveries of A-340s for its own international flights to the US. As per the alliance, Jet and Kingfisher will most probably use each other's twin aisle aircraft on international routes on code share basis.
Meanwhile, Jet Airways chairman has extended a personal apology to the staff that was first retrenched and then reinstated, and has promised not to cut their wages. Reports in the media indicate that Goyal met with a group of the retrenched-and-reinstated staff to assured them that there would be no wage cuts. Around 200 employees were reported to be at this meeting which was held at a five star hotel in Mumbai.
Reports suggest that Goyal maintained he did not reinstate employees under political pressure, but did so as it was his personal decision. His contention flies in the face of civil aviation minister Praful Patel's assertion that indeed he had spoken to Goyal regarding the matter.
