Wednesday, 15 October 2008

Jet-Kingfisher to rationalise 15 domestic routes next month to increase fare

The country's two leading private carriers Jet Airways and Kingfisher Airlines have decided to scrap more than 15 routes including overseas in next few weeks. Together, they would reduce capacity by 12%, which means grounding of five to six aircraft.

Jet Airways, the country's largest private airline, is likely to cut 10 domestic routes while Kingfisher is considering reduction of five non-profitable domestic routes from next month.

To add perspective to this numbers, it may be mentioned that these two companies enjoy almost 60% share of the domestic aviation market with more than 100 routes and a fleet size of 189 aircraft.

The reduction in routes follows the joint announcement on Monday by these two companies that they would share infrastructure to prune the mounting operational losses in the wake of the spiralling aviation turbine fuel prices. Jet on Tuesday said it would lay off 800 staff.

Jet CEO Saroj Dutta said the company would lay off another 1100 staff. This will take the total number to 1900. Mr Dutta said the company would cut 15% domestic routes and will also withdraw London-Amritsar flight.

The airlines would reduce services in the metros as well as in tier II cities. During the last three months, almost all the players started new routes originating from Cochin, Chennai, Jaipur, Bangalore, Ahmedabad, Nagpur, New Delhi, Kolkata and Mumbai.

A Jet Airways executive said non-profitable routes-- those having load factors of below 40%-- will be scrapped soon. However, those routes will be served by Jet-Kingfisher together. It means, they will be serviced by one of them. The executive declined to share the revenue sharing formula between Jet and Kingfisher.

Confirming that the decision to be implemented in next few weeks, the Jet official spokesperson told ET, "There would be route rationalisation in domestic and international operations." He, however, declined to divulge further details. The Kingfisher spokesperson was not available.

An analyst with a domestic brokerage said airlines have to rationalise capacity in order to offset rising jet fuel prices. High price of fuel is the key risk to earnings, while inadequate airport infrastructure and employee retention pose additional challenges, he added.

The industry is struggling for survival. " I am not sure how many of them would be in business next year," the analyst added.

Source: EconomicTimes

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