Home » Business » Jet launches yet another no-frills, low-cost service
The fares for the service will be 10 to 15 per cent lower than the normal Jet Airways economy fares, Jet Airways Chief Commercial Officer Sudhir Raghavan told media persons in Mumbai. They will be in the same range as those offered by JetLite, formerly Air Sahara, the value carrier the group acquired in 2007. The two airlines together have a 25.3 per cent market share, just behind Kingfisher.
Jet Airways has not launched the new service under the JetLite brand, according to competitors, owing to a court case over the latter between the former owners, the Sahara group, and Jet, over the non-payment of instalments in the Rs 1,450-crore deal. The final judgement on the case in the Bombay High Court will be given on Friday. Although Jet Airways executives declined to comment on this issue, a senior executive with a competing low-cost carrier pointed out that Jet promoter Naresh Goyal may not want to transfer assets to a disputed company.
The Konnect service will be initially operated by eight of Jet Airways' 86 aircraft, offering 54 flights a day, or 15 per cent of the airline's daily flights.
The new service will initially operate with two 737 and six ATR aircraft on sectors like Chennai-Coimbatore, Chennai-Madurai, Chennai-Kochi, Mumbai-Ahmedabad, Mumbai-Bhopal, Mumbai-Udaipur, Bangalore-Pune and Bangalore-Mangalore.
Passengers on these flights will have to buy meals on board, but both on-ground and in-flight service will be delivered by Jet Airways staff.
Aviation experts and competitors view the move as part of Jet Airways promoter Naresh Goyal's strategy to combat the fall in market share of full service carriers in a market going through slowdown and to shift more of his capacity towards low-cost services. Jet executives hope that the move will help Jet Airways increase its passenger load factor 30 per cent. The passenger load factor in the domestic operations is currently around 65 per cent.
"We had anticipated that full-service airlines will be relevant only in the top six cities, and the rest will be served by budget carriers. As a result, airlines like Jet have to reduce their full-service capacity and shift to low-cost services. That is what Jet has done," said Kapil Kaul, who heads aviation consultancy Centre for Asia Pacific Aviation.
Kaul explained the reason for this shift was that low-cost carriers offered fares 40 per cent cheaper but provided about 90 per cent of the services of full-service carriers. More importantly according to latest figures from CAPA low-cost carriers have shown an improvement in pre-tax margins, in contrast to full-service carriers.
Competitors, however, think Jet's strategy could be risky. "Revenues are down because of lower fares and Jet Airways' costs are much higher than JetLite, so they will make more losses. They should have transferred the Jet Airways aircraft to JetLite and increased its capacity there," says a senior executive of a leading low-cost carrier.
Jet executives disagree. "Consumers are leaning towards a low-fare service and a large segment of consumers want low fares as well as the brand. Our product is designed to suit their needs," explained Raj Sivakumar, vice-president, revenue management of the airline.