Airlines cut corners to stay afloat
The Indian aviation industry has hit an air pocket, forcing the two largest airlines-Jet Airways and Air India-to scramble into salvage mode.
By ET Bureau |
NEW DELHI: The Indian aviation industry has hit an air pocket, forcing the two largest airlines���Jet Airways and Air India���to scramble into salvage mode.
At a daily operational loss of $2 million (Rs 8.6 crore), the situation has become especially alarming for Jet Airways, prompting senior GM (MIS and investor relations) KG Vishwanath to shoot off an internal communiqu�� to the company���s senior executives. ���The situation is grave in terms of the magnitude of losses that we have been incurring. We are very concerned, so is the chairman (Naresh Goyal).
Our current losses are $2 million a day (including JetLite). Jet Airways and JetLite are suffering daily domestic losses of $500,000 (Rs 2.15 crore) each while our international business is losing over $1 million (Rs 4.30 crore) a day.���
Driven by losses of almost Rs 10 crore a day, Air India, in its merged avatar, is now considering severe cost-cutting measures such as slashing employee allowance, reducing in-flight catering expenses on short-haul flights and restructuring functional arms.
The airline is also considering options like reducing maintenance costs by stationing officers at hubs instead of allowing them to travel at regular intervals.
Civil aviation minister Praful Patel is likely to hold a review meeting of the public sector airline in the next few weeks, in the wake of mounting losses and falling load factors.
Jet Airways, Air India and other domestic airlines have reasons to be worried. Twenty-four airlines across the world have gone bankrupt on account of high and unsustainable fuel costs.
In India, on the back of soaring fuel prices and dwindling passenger loads, the aviation industry���s operating costs have gone up 30-40%. Fuel prices for airlines have doubled in the past one year to Rs 70,000 per kilolitre from Rs 36,000 last year, forcing airlines to increase fares. Consequently, passenger loads have fallen to an average 55-60% per flight from last year���s peak of 70-75%.
Other airlines such as Kingfisher, Air India, IndiGo, SpiceJet and Go Air are all faced with similar situations, forcing one of them to even look for a buyer. Domestic carriers lost about Rs 4,000 crore in 2007-08 with Air India leading the pack.
���As against a 27% wage bill globally, our wage bill is 22% of total input costs. Even then we are at a loss,��� an Air India official said.
At a daily operational loss of $2 million (Rs 8.6 crore), the situation has become especially alarming for Jet Airways, prompting senior GM (MIS and investor relations) KG Vishwanath to shoot off an internal communiqu�� to the company���s senior executives. ���The situation is grave in terms of the magnitude of losses that we have been incurring. We are very concerned, so is the chairman (Naresh Goyal).
Our current losses are $2 million a day (including JetLite). Jet Airways and JetLite are suffering daily domestic losses of $500,000 (Rs 2.15 crore) each while our international business is losing over $1 million (Rs 4.30 crore) a day.���
Driven by losses of almost Rs 10 crore a day, Air India, in its merged avatar, is now considering severe cost-cutting measures such as slashing employee allowance, reducing in-flight catering expenses on short-haul flights and restructuring functional arms.
The airline is also considering options like reducing maintenance costs by stationing officers at hubs instead of allowing them to travel at regular intervals.
Civil aviation minister Praful Patel is likely to hold a review meeting of the public sector airline in the next few weeks, in the wake of mounting losses and falling load factors.
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Jet Airways, Air India and other domestic airlines have reasons to be worried. Twenty-four airlines across the world have gone bankrupt on account of high and unsustainable fuel costs.
In India, on the back of soaring fuel prices and dwindling passenger loads, the aviation industry���s operating costs have gone up 30-40%. Fuel prices for airlines have doubled in the past one year to Rs 70,000 per kilolitre from Rs 36,000 last year, forcing airlines to increase fares. Consequently, passenger loads have fallen to an average 55-60% per flight from last year���s peak of 70-75%.
Other airlines such as Kingfisher, Air India, IndiGo, SpiceJet and Go Air are all faced with similar situations, forcing one of them to even look for a buyer. Domestic carriers lost about Rs 4,000 crore in 2007-08 with Air India leading the pack.
���As against a 27% wage bill globally, our wage bill is 22% of total input costs. Even then we are at a loss,��� an Air India official said.
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