Jet Airways, which acquired and rebranded Air Sahara as JetLite, is merging it with its own low-cost brand Jet Konnect, following which the low-cost unit will fly under the JetLite licence, while the full-service carrier will continue to use the Jet Airways licence, a company official told FE.
The full-service and low-cost airlines will function as two separate companies with their own management teams. At present, Jet Konnect accounts for 75% of Jet Airways? domestic operations, which will rise as the company deploys more planes for the low-cost airline, the official added.
?We will make use of the two licences and operate as two separate airlines under one group company,? said a senior Jet Airways executive. ?A decision on the branding of the low-cost arm is yet to be taken, but we do see more synergies with the Jet Konnect brand.?
The airline had announced in July that it would merge the two as it did not make sense to operate two low-cost brands.
A Jet Airways spokesperson said the airline will renew the JetLite licence which will expire at the end of this year.
JetLite was formed after Jet Airways purchased the airline business of the Sahara Group in 2007. It has a fleet of 18 Boeing 737 planes. Airline sources said that this could be expanded as part of the merger plan.
?The chairman has stated that the focus should be on low-cost,? said the Jet Airways executive earlier quoted. ?After the brand merger, more aircraft will be deployed for the low-cost operations. Jet Airways will focus on select routes and be a completely full-service airline with its aircraft in a two-class configuration.?
Consultants say the plans are a step in the right direction. ?Two airline licences will allow Jet Airways to be present on trunk routes through both airlines,? said a consultant with a global consultancy and tax advisory firm. He can?t be quoted as his firm doesn?t comment on individual companies. ?Smaller full-service operations will allow Jet Airways to focus on select routes without having to expand and deploy excess capacity on smaller routes.?
As per current route disbursal guidelines, airlines are required to deploy a tenth of their capacity on trunk routes like Delhi-Mumbai, on non-metro routes of category II routes.
Jet Airways is also planning to expand its low-cost operations overseas. At the moment, its sole overseas low-cost flight is to Kathmandu via JetLite.
JetLite will complete five years of operations by the end of 2012. Air Sahara, under whose licence JetLite operates, also had the permission to fly internationally in 2004. Thus, regulatory issues will not prevent Jet from flying a low-cost airline on international routes.
However, experts are skeptical: ?Historically, across the world, the airline-within-an-airline concept has not worked,? said Nawal Taneja, professor emeritus in the department of aviation, Ohio State University, who has written several books on aviation strategies. ?Qantas succeeded with Jetstar because since its launch in 2004, Qantas allowed it to be managed independently and follow its own growth trajectory.?
Former Jet Airways executive director Saroj Datta said that operators have found it difficult to operate both low-cost and full service airlines because of the different kinds of mental attitude and approach required to run them.
?But the world is changing; so who knows how the future will pan out,? he said. ?Several well-known airlines worldwide have set up subsidiaries and are running low-cost carriers successfully but under separate managements.?
Consultants say a revamp of JetLite is needed very soon and a merger of the low-cost brands would be the way to go. ?JetLite at the moment finds it self competing against Jet Konnect. It can?t match fares and costs and it has become unprofitable,? said the consultant quoted above. ?A new management and a new mission will perhaps revive it.?
Auditors of Jet Airways, Deloitte Haskins & Sells and Chaturvedi & Shah, had mentioned in November that JetLite?s net worth had been completely eroded. As of the fiscal second quarter, JetLite?s revenue per passenger had dropped by 10% to Rs 3.29 as against Rs 3.67 in the corresponding quarter. The airline needed to fly planes almost completely full to break even as the breakeven seat factor in the fiscal second quarter stood at 99.4%.
