There's - Orient Aviation

More documents

Recommendations

Info

EXECUTIVE INTERVIEW: JET AIRWAYSJet challengesthe old orderToday Jet Airways is India’s number onedomestic carrier. Tomorrow, it wants to takeon the world, chief executive, WolfgangProck-Schauer, tells TOM BALLANTYNEJet Airways chief executive, WolfgangProck-Schauer, won’t say Jet Airwaysintends to displace national flag carrierAir India as the country’s biggestinternational airline. But there’s littledoubt that’s the plan – and sooner ratherthan later.The vision of founder and chairman,Naresh Goyal, India’s 16th richest man, isfor Jet to be “among the top five airlines inthe world ... so I’ll leave it at that,” Prock-Schauer told <strong>Orient</strong> <strong>Aviation</strong>.“If you look at our fleet development, wehave 60 aircraft. We will have 90 by 2008-09. We have ordered a further 10 B787s fordelivery in 2011 and also plan to significantlygrow our B737 fleet. So we will be quite a bigcarrier in the not too distant future.”As India’s top domestic airline, Jetalready has a 30% slice of the home market.It operates 47 B737s, mostly late model NewGeneration types, and eight ATR 72-500turboprops. But it only has five widebodyjets – three A340-300s and two A330-200s. Intercontinental capacity, however,is about to rise dramatically while systemwidecapacity is being expanded at some 35-40% a year.From next month, 10 B777-300ERswill begin to arrive. There are options ona further 10. Twelve A330-200s are also onorder. Deliveries of the 22 widebodies willbe completed by October next year.That will open the door to increasingforays into promising new long-haul marketsand bring a significant shift in the balancebetween Jet’s domestic and internationaloperations. Overseas flights now accountfor 22% of revenue. That will rise to 50%in two years. It is a critical strategy in anincreasingly competitive market, because thegross yield per passenger on internationalflights is now US$362, compared to $125 ondomestic services.Like most Indian airlines, Jet hassuffered losses from high fuel costs, intensecompetition and overcapacity. It recorded a$101 million profit in the financial year endedMarch 31, 2006, but the last 12 months havebeen challenging. Hit by falling yields andlower load factors, it lost $10 million inthe first quarter of the 2006-07 year, thenanother $12.5 million in the second quarter,before clawing its way back to a $9 millionprofit in the third.The turnaround was due to an increasein the system-wide load factor of close to70%, much higher than the quarter before,allied to a reduction in the break-even seat10 ORIENT AVIATION INDIA MARCH 2007
factor to 68.7% which increased yields.Cost-saving initiatives and lower fuel costsmade up the rest of the equation. For the firsttime, international operations came close tobreak-even.Overcapacity has been a particularissue in India as an array of young airlinesintroduced large numbers of new aircraftinto the fast-expanding domestic market.Last year, fleets increased by 45%. “Weare not out of the woods yet, but we seecapacity induction slowing down,” saidProck-Schauer.Importantly, that should also reduce thelevel of ticket discounting that has batteredairline profitability, leading in part tocombined losses by Indian carriers last yearof $400 million.Coupled with this, Jet is driving aheadwith moves to bring down its overheads,renegotiate contracts and improve assetutilization. At the same time, it is trying toreduce distribution costs by increasing directonline bookings from the current 8% to 25%,saving up to $10 on each ticket.But it is on the international front thatthe airline will see the most significant shiftin emphasis in the next few years and itsnew aircraft purchases underline that fact.Austrian-born Prock-Schauer, who took overat the helm in June, 2003, said the B777 waschosen because it was optimized for longerroutes of up to 14 hours, the A330 for flightsof 10 hours and below.“The B777 will be focused on the UKand North American routes and the A330on regional Asian routes, Africa and thinnerEuropean routes. From the beginning of2008, when current government policy willallow us, we should also be flying to the Gulfregion,” he said.Jet currently has a modest offshorenetwork. It flies to Colombo, Kathmandu,Singapore, Kuala Lumpur, Bangkok andLondon. That will begin changing in Augustwith the launch of flights from Mumbai toBrussels and on to New York. This will befollowed later in the year by a Mumbai-Shanghai-San Francisco service, as well asa flight to Toronto via a point in Europe.Prock-Schauer made it clear that Jet’splan is not simply to add destinations for thesake of rapid network expansion. “Londonis our only European destination at themoment. We have a strategy that, wheneverwe fly to a destination, we want to offer highfrequency,” he said. “Right now we havefour flights a day into London Heathrow;two daily from Mumbai, one from Delhiand one from Amritsar.“When we started we wanted to firstestablish a critical mass and we have nowdone that at Heathrow. The next step is toopen a second destination in Europe, whichis Brussels.“There we are tying up with local carrierSN Brussels, to give us good feed and toconnect to other European cities throughtheir flights.”More European destinations are likely tofollow. Jet is evaluating Germany, France,Switzerland and northern Italy.Two other areas are high on its list ofnetwork priorities: the Gulf region andChina.“Traffic between India and the Gulf ishuge. Some four million Indians are livingthere and these people tend to come homeonce or twice a year,” said Prock-Schauer.Growing economic links between Indiaand China also excite Prock-Schauer. Airtraffic between the two is light but, with theHimalayas getting in the way of land links,expanded air connections make a great dealof sense.“What we see now is tremendous growth.The whole relationship between India andChina is changing rapidly,” he said. “There ismuch more interaction, trade and tourism, soI see big potential in air traffic growth. Thatis the reason we want to start flights throughto China this year with a continuation to SanFrancisco.”‘What we see now is tremendousgrowth. The whole relationshipbetween India and China ischanging rapidly.’Wolfgang Prock-SchauerProck-Schauer believes Jet’s majorchallenge looking forward is to achievegood profit margins.“You have to keep your costs undercontrol, despite the fact there is a lot ofupward pressure on costs because ofthe scarcity of personnel, such as pilots,engineers and other professionals,” he said.“Managing the expansion is anotherbig challenge because we are growingsystem-wide, at 35-40% annually. Youhave to manage that and achieve profitablegrowth.”However, he believes Jet is wellpositioned, particularly in terms of trainingthe personnel it needs.“We can train all categories. We havetwo B737 simulators and we are getting twomore, one a B777 and the other an A330,” heJet Airways: China routes this year?said. “We can generate 150 pilots annuallyon our own. We can train technicians andmaintenance people as well as cabin crew.The airline which has all the infrastructureneeded to provide those personnel will havea huge competitive advantage.”With nine domestic car riers nowoperating and most losing money, Prock-Schauer doesn’t believe everyone willsurvive.“The question will be: who is best fundedand who is best managed? These are theairlines that will survive. The others will goout of business,” he said.He is certain that Jet Airways will notbe one of the casualties. “We have seen inthe last quarter that we really can achieve aprofit,” he said.“I think we are best positioned with thenetwork strength, the established customersand product quality we have, to move forwardand achieve our plans.”MARCH 2007 ORIENT AVIATION INDIA 11
Page 3 and 4: COMMENTCaution needed in a time of
Page 5 and 6: is loosi ng t hei r sh i r t sdomes
Page 8: COVER STORYthe meantime, constructi
Page 14: of the U.K. That followed a $97.6 m
Page 17 and 18: Wadia also operates a “flexible f
Page 20: EXECUTIVE INTERVIEW: PARAMOUNT AIRW
Page 23: Join aviation leaders fromacross th

There's - Orient Aviation

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?