India’s largest passenger carrier by revenue, Jet Airways?saddled with a debt of R14,100 crore until September? is cutting corners to stay afloat. Apart from disallowing business class passengers from using lounges, it is selling off expensive cutlery and linen to staff to replace with cheaper ones and asking its personnel to take one unpaid leave every month.
The staff has been offered to purchase business class cutlery and linen at heavily discounted prices, two employees told FE. The staff did not want to be quoted as the matter is sensitive.
?We have been told to take one unpaid leave every month,? one of the two cabin crew employees said. Jet’s cabin crew earns anywhere between R35,000 and R70,000 a month, depending on seniority.
The airline’s wage bill has been on the rise. For the second quarter, its staff cost rose 27% to R407 crore on sales
of R3,293.54 crore. ?With aviation impacted by rising fuel and airport charges, a depreciating rupee vis-a-vis the dollar and general economic slowdown, Jet Airways is continually looking at lowering its unit costs and improving productivity,” a Jet spokesperson said in an email reply.
?We are trying to reduce costs by 5-10% annually,? Jet Airways? chief operating officer, Sudheer Raghavan told analysts after the company announced its fiscal second quarter results on November 14.
Consultants say the current cost-cutting measures are a double-edged sword for Jet. ?It is a risk,? said a consultant with a global audit and consultancy firm. He cannot be quoted on individual companies. ?Measures like withdrawing airport lounge access, changing cutlery and linen will, at best, give the airline cost savings of 1%. While they save on costs, they run the risk of losing passengers. A passenger who pays the full fare, especially business class, expects top quality service.?
Three of India’s largest full-service carriers ? Jet, Kingfisher and state-owned Air India ? burdened with high debt and rise in fuel costs, have been struggling to pare costs to stay trim and lean.
Kingfisher Airlines, owned by billionaire and liquor baron Vijay Mallya, has cancelled unprofitable routes and reconfigured its planes to fly more passengers. Air India plans to retire 3,000 regular employees through VRS, details of which are being worked out, as reported by FE on November 10.
Higher costs have pulled down Jet to a R713-crore loss in the fiscal second quarter. The cost of each seat on domestic route for every kilometer travelled (CASKM)?a measure of airline’s expenses ? shot up 23.5% during the quarter to R4.65 from R3.76 in the same quarter previous year.
This pushed up the break-even seat factor to 95.2% during the quarter against 77.7% in the corresponding quarter last year, meaning that the aircraft needs to travel with most seats filled to break even. The airline flew with its aircraft just 72% load factor during the quarter.