Airlines all over the world have suffered heavy losses due to restrictions on travel to contain the Covid-pandemic, pushing them to resort to cost-cutting measures and operating with a leaner workforce.
Two years after getting grounded due to a lack of funds, Jet Airways, India’s oldest private sector airline, will resume operations in the first quarter of 2022. But is it a good time to take off for the airline under the new leadership led by London-based Kalrock Capital and UAE-based businessman Murari Lal Jalan?
Airlines all over the world have suffered heavy losses due to restrictions on travel to contain the Covid-pandemic, pushing them to resort to cost-cutting measures and operating with a leaner workforce. A report by aviation consultancy and research firm, Centre for Asia-Pacific Aviation (CAPA) projects a loss of $3.9 billion for Indian airlines in FY22.
Rating agency ICRA expects overall cash loss for the sector at around Rs 3,500 crore in FY2021, impacted by a 66% year-on-year slip in passenger traffic amid Covid-induced travel restrictions. Mark Martin, founder and CEO of Martin Consultancy, an aviation consultancy and safety firm is of the view that the private airline will find it difficult to resume its operations in the first quarter of 2022. “The company will have to hire new pilots, train the staff and work on several other operational glitches before flying. It is not easy to make a comeback so fast with a new fleet of staffers.”
Apart from low traffic and the fear of deadly Covid waves, another challenge for Jet Airways would be managing the cost of fuel.
In a statement, Murari Lal Jain said that Jet Airways, after resuming domestic operations in the first quarter of 2022, will also target short-haul international operations by Q3-Q4 of 2022. “We plan to have 50 plus aircraft in three years and over 100 aircraft in five years. This also fits perfectly well with the short-and long-term business plans of the consortium. The aircraft are being selected based on a competitive long-term leasing solution,” said Murari Lal Jalan. The consortium has already hired around 150 employees and is in discussion with aircraft lessors.
Apart from the challenge of putting in place a fresh fleet of aircraft and employees, the company will also have to deal with high fuel prices, which have already gone up by 32% since the beginning of this year. ATF prices have risen from around Rs 50,000 per Kl in January to Rs 66,527 per Kl on September 1, 2021. As the global economy picks up in the coming months- an important factor that will decide the number of people who will travel by air- the price of ATF is bound to go up. ATF accounts for 35-50 per cent of the cost of running an airline in India.
Aviation expert, Amrit Pandurangi, points out the problem of getting slots for Jet Airways, apart from managing the fuel cost and putting a new fleet in order. “The government has overhauled its slot allocation policy and nobody gets favourable treatment now. The slots that Jet Airways had earlier have been allocated to other airlines and Jet will have to find a way to get back those slots.”
Airport slots are specific points in time allotted for an airline to land or take off its aircraft at an airport. Apart from this, according to Pandurangi, the new management of Jet Airways will also have to work on its brand positioning as, despite the private airline being popular among travellers, there’s no brand loyalty among customers in a post-covid world. “ It’s not a business where you can come and make money. The management will have to be prepared for the long haul before they think of hitting profitability. As everyone knows, aviation is a glamorous sector, but most businesses have been unsuccessful in it.”
The new management has proposed to invest Rs 600 crore in the first two years of taking over Jet Airways to repay creditors and acquire an 89.79% stake in the carrier.