Shortage of captains to hit overseas flights it relies on for revenue, profit; OTP too affected
With chances of nearly 50 senior pilots moving out of Jet Airways, the airline could be in trouble as it faces a shortage of captains. Every flight must have at least one captain and Jet’s present pool of pilots includes about 831 captains, of whom only about 330 fly wide-bodied aircraft. It is critical for the carrier to have captains to fly wide-bodied aircraft as it is hugely dependent on its overseas operations for revenues and profits. Even before this, Jet was already having trouble with first officers over pay cuts. The pilot count at about 1,734 today (according to industry sources, as the airline does not disclose these numbers) is down from about 2,000 in July last year, and falling. FE has learnt that the majority of the 50 senior pilots is headed to Vistara, the Tata-Singapore Airlines joint venture, which is in expansion mode.The trouble between junior pilots and the management started in July last year after the management wrote to them suggesting they either take a 30-50% cut in their salaries or stipend or leave. The move followed excess hiring of about 200 first officers on an inaccurate demand forecasting by its team. This was reported by the media at the time.
A pilot at Jet said on condition of anonymity that the functioning of the airline had changed with sudden changes being introduced. “They are also a breach of the contract that was entered into by the pilots and the airline,” the pilot added. He said today pilots do not want to fly after their duty hours if there is a shortage of hands as was the case earlier. Jet declined to comment for the story. On an investor call earlier this month, Jet CFO Amit Agarwal said the airline was taking a series of steps to improve its on-time performance (OTP). Agarwal said the OTP had improved in January and February compared with that in the December quarter and that this is the ongoing focus area for the airline.
In response of FE’s query to Vistara on the subject, the airline said, “As we continue to scale up our business and operations, it is only natural for us to hire more talent, including cockpit crew. As every other airline, most applications for technical positions, such as that for pilots, come to us from within the industry. We’re glad that in a short span of three years, our success has drawn great interest from people within and outside the aviation ecosystem, helping us become an employer of choice.”
The non-cooperative stance of several pilots is impacting the on-time performance of Jet.
“An airline running out of pilot flying hours is symptomatic of deep trouble within that airline and there is widespread discontent among Jet pilots and we might see some who will look at opportunities with other domestic carriers,” said an airline executive not wanting to be named. In aviation industry parlance, pilot shortage is meant to indicate an airline not having pilots with adequate flying hours available to continue flying. In the early 2000s, the entire aviation industry had struggled with pilot shortage due to the flying hour restriction. Regulations today mandate that a pilot can fly for only 1,000 hours in every consecutive 365 days.
Besides, absenteeism, medical reasons can also lead to pilots not being able to fly. This makes rostering a challenge. Any incorrect rostering can create an issue as pilots are barred from flying more than 8 hours per day, more than 35 hours in seven days and more than 125 hours in 30 consecutive days, besides the yearly flying hours restriction.What’s even more worrying is that Jet seems to have become the hunting ground for talent. While the private sector had in its initial years poached talent from Air India, and later tapped talent from a sinking Kingfisher Airlines, today they find the disgruntled pilots at Jet an ideal catch. And they are going after senior talent, mostly captains.
Jet had 903 first officers (as on January 1, 2018). What’s more, Jet flies a range of aircraft — wide-bodied A350s and Boeing-777s, besides Boeing-737s and ATRs — and, therefore, its pilot requirements are quite different from peers, who mostly fly one type of aircraft. For instance, wide-bodied aircraft require more pilots per aircraft than single-aisle aircraft. Besides, a pilot of one type of aircraft cannot always be used to fly another type of aircraft.
That Jet flies much more overseas than any other airline (read wide-bodied aircraft), makes it even more vulnerable to poaching, as such talent is sought after by peers looking to expand their overseas operations. Jet had a share of 44% in international flights by Indian carriers in FY17 (more recent data was not available), with Air India commanding a share of 32%, followed by IndiGo and SpiceJet at 14% and 10%, respectively.
More importantly, Jet is hugely dependant on its overseas operations for both revenues and traffic. In January, for instance, it flew 23,144 hours (52.4%) on international routes against 21,007 hours (47.6%) on domestic routes. In contrast, domestic market leader IndiGo flew 53,161 hours (87.3%) on domestic routes against only 7,761 hours (22.7%) on international routes. Given that international flights require a larger allocation of crew per aircraft than a domestic flight, Jet’s pilot strength suddenly starts to look very different vis-a-vis competition.
Jet is believed to have close to 1,734 pilots to service about 650 flights per day using 119 aircraft. In contrast, IndiGo has 2,300 pilots on its rolls for a peak of 1,020 flights using 153 aircraft. Even without considering the higher allocation of manpower for international flights, Jet’s pilots per aircraft ratio at over 14 seems less comfortable than IndiGo’s over 15. After the excessive hiring in early 2017, Jet seems to have swung sharply in the other direction, and this is telling. Brokerage Credit Suisse in a report on the aviation sector points out that Jet’s employee benefit expenses are sharply higher than those of IndiGo and SpiceJet. Jet’s employee expenses to revenues in Q3-FY18 stood at 12% versus 9.9% for IndiGo.
The Jet management seems conscious of this and has been taking steps to address it. But pilots are upset because its move to crimp costs is impacting pilot welfare schemes and contracts of some pilots. The cost-cutting is also translating into pruning of support staff strength, like engineers at some locations, which is also a concern for pilots. Jet saw its employee expenses rise by 5.3% in Q3FY18 while operating revenue grew 10.2%. In contrast, employee costs for IndiGo grew 16.4% with operating revenue growth of 23.9%.
The Naresh Goyal-promoted airline continues to find itself at the bottom of the pack with an OTP of 62.4% in January. Market leader IndiGo’s OTP was 75.4%, followed closely by SpiceJet at 74.4%, according to Directorate General of Civil Aviation data. In 2014, there were reports that Jet and Etihad had tried to poach at least 140 Air India pilots and the government was mulling putting mechanisms in place to curb the practice. Is Jet at the receiving end today?