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Sep 02, 2012, 05.11 PM IST
Jet Airways, which once prided itself on its full service flights, is now looking to its low fare arm to improve profitability.
Jet Airways , which once prided itself on its full service flights, is now looking to its low fare arm to improve profitability. The company recently merged both its low fare verticals--JetLite and JetKonnect--into a single brand as it tries to take on competition, especially from IndiGo which emerged as the number one carrier in terms of market share for July
IndiGo's rapidly expanding market share must be all the more galling for Jet Airways, considering that its fleet size is four times bigger than that of IndiGo.
How did IndiGo score a brownie over Jet?
For a full service carrier like Jet or even Air India, the turn around is little delayed as they serve meals and after passengers alight the aircraft, cleaning up takes time. Logically, IndiGo can deploy its aircraft for more hours then its full service counterparts who also operate on same sectors.
Its not that Jet doesn't operate in low cost segment. JetLite and JetKonnect have been doing that since 2008 and 2009.
What is it that Jet needs to do?
This could have been the case for Jet to announce low cost operations under the banner of JetKonnect with JetLite ceasing to exist. Sudheer Raghavan, chief commercial officer at Jet Air said that the airline has always had a flexible approach in devising strategies to meet customer needs. "Since its inception in 2009 JetKonnect has been a success and hence we thought it best to have a single brand in low fare segment." He further said the airline is confident of the brand doing well by optimally deploying and cross--utilising common resources of Jet on JetKonnect.
Another official at Jet explained that the airline can deploy JetKonnect on high density but price sensitive sectors like Patna-Delhi, where it can get volumes but lower yields. However, a sector like Bombay-Delhi will anyways have high occupancy despite exorbitant fares, where Jet can operate with 'J' class seats which can compensate with healthy revenues per available seat kilometers (ASKM).
Meanwhile along with the change is customer preferences, there are other factors as well which gradually led to a paradigm shift in Jet's business model over the years.
In the latter part of 2008, the onset of the global economic crisis started turned out to be particularly challenging for aviation companies worldwide. Corporates started cutting down on business class travel for their executives, holiday-makers too opted to travel by train to beat recession. Full service carriers were worst hit when compared with their low fare counterparts as business class travel became unaffordable. Luckily, Jet had just positioned JetLite as a low fare arm to check how it would fare in the Indian market which is very price sensitive. JetLite's fares were 15% lower than Jet Air.
Predatory pricing harms all
Full Service versus no frills
Low fare became the market mantra in aviation space.
Prompted by the changing business dynamics, recently on the sidelines of the company's annual general meeting, Jet founder Naresh Goyal, who once believed there is nothing called low cost in aviation business said, "In difficult circumstances it is prudent to adapt to the changing market environment. Customers prefer low cost flying and hence we are offering them what they want." The airline re-aligned itself by offering more low cost seats on domestic network.
But will the low cost strategy pay off?
Tags: Jet Airways, which once prided itself on its full service flights, is now looking to its low fare arm to improve profitability. The company recently merged both its low fare verticals—JetLite and JetKonnect—into a single brand as it tries to take on competition, especially from IndiGo which emerged as the number one carrier in terms of market share for July, IndiGo
Action in Jet Airways
Jun 18 2013, 22:39
- in MARKET OUTLOOK
Jun 18 2013, 22:39
- in Business