Jet Airways to close budget units in search for profit

A Jet Airways (India) Ltd. Boeing Co. 737 aircraft prepares to land at Chhatrapati Shivaji International Airport in Mumbai

Jet Airways, the Indian carrier 24 percent owned by Etihad Airways, will end its budget-airline units in an effort to turn its local operations profitable, Chairman Naresh Goyal said.
The airline will close its Jetlite and JetKonnect businesses by the end of this year and fly all its planes under a single, full-service brand, Goyal told reporters Monday in Mumbai. The move will help it achieve its target of making a profit by 2017, he said.
“We are in this to make money,” Etihad President James Hogan said at the same event. Jet’s strategic location in South Asia puts it in a position to compete with Middle Eastern airlines on outbound traffic from India, one of the fastest growing aviation markets in the world.
India is one of the world’s most expensive markets for airlines, and carriers have lost a combined 594 billion rupees (USD9.7 billion) over the past seven years, Sydney-based civil aviation think tank CAPA estimates. Jet’s decision to offer only full-service flights will pit it against state-owned Air India and a new venture from Tata Sons Ltd. and Singapore Airlines that plans to start flying by October.
Jet is preparing to redesign its first- and business-class cabins to compete with Emirates Airline and Singapore Airlines, people familiar with the plans said July 25. In addition to changes to the cabin seats, Jet plans to lease Airbus A380s from Etihad, once the Abu Dhabi-based airline starts receiving the super-jumbo jets, one person said.
The Tata-SIA venture will be called Vistara, the companies said in a statement yesterday.
Jet’s loss in the quarter ended June 30 narrowed to 2.18 billion rupees from 3.55 billion rupees in the year-ago period, the company said yesterday. The result was less than the loss of 3.24 billion rupees estimated by analysts.
The company hasn’t reported a full-year profit since the year ended March 2008, according to data compiled by Bloomberg.
Jet shares have fallen 16 percent this year, compared with the 21 percent increase in the benchmark S&P BSE Sensex Index. The stock gained 0.9 percent Monday in Mumbai trading, before the release of the quarterly results.
Even as Jet focuses on the full-service customers, low-cost carriers are expanding in India. Air Asia started Indian operations in June, offering base fares of less than 2 U.S. cents, despite the poor track record of Indian discount carriers. Over the last seven years, airlines have lost an average $22 every time a passenger stepped on board, CAPA estimates.
Jet and SpiceJet have posted annual losses, while Kingfisher Airlines, saddled with $1.4 billion of debt, has been grounded since 2012. Closely-held Indigo, the nation’s biggest carrier, doesn’t disclose its financial results. Bloomberg

Anurag Kotoky and Adi Narayan