FLUG REVUE February 2006: Jet Airways expansion under way

February 2006

INDIA´S JET AIRWAYS EXPANDS

By Andreas Spaeth

The flight from Hyderabad to Mumbai, just under an hour away, in a modern Boeing 737-700 is a pleasure. Even in the Economy Class, attractive flight attendants distribute several rounds of drinks and a hot meal, while the generous 2+2 seating arrangement in Business Class is comfortable. Arriving in Mumbai, the usual Indian chaos is plain to see on the ground: the old Sahar International Airport is bursting at the seams and a planned extension to the domestic terminal will not be opened until August. Even worse than this is the journey to the extremely modest headquarters of Jet Airways, India's biggest and most successful airline, through endless traffic jams in this metropolis of ten million people which, although only a few kilometres long, takes almost an hour and a half.

Boeing 777-300ER

On the executive floor they speak German, as the CEO appointed in 2003 is an Austrian, Wolfgang Prock-Schauer, who was previously with Austrian Airlines and Star Alliance. His deputy, COO Peter Luethi, is Swiss and previously held the same post in the service of Swissair. Jet Airways has just experienced a triumphant stock market flotation, in the course of which chairman and proprietor Naresh Goyal earned himself $2.2 billion in the space of just a few hours in return for 20 percent of his shareholding. The rest is still in his hands. In terms of stock market valuation, Jet Airways is one of the most valuable private companies in India.

“Over the last two years we have been a highly profitable airline and we are one of the most successful carriers in Asia,” said Peter Luethi during an interview with FLUG REVUE in his tiny office. In the first quarter of 2005 alone it made a profit equivalent to $30.6 million. Achievements such as 90 percent punctuality on flight departures can only really be appreciated when one is familiar with the difficult environment in which Indian airlines have to operate. “We are under pressure on on-time performance,” Luethi admits, “since at our hub here in Mumbai 25 flight movements are handled per hour on a single runway and flight separation on approach is twice big as in Europe.” Jet Airways is dependent on Mumbai and operates 504 flights per week or a quarter of all its flights out of this hub, almost twice as many connections as from Delhi, its second hub. A lot of what is taken for granted elsewhere in aviation does not apply in India. Thus, for example, outsourcing of any services is prohibited, with the result that every airline has to maintain its own baggage scanners plus the associated personnel. Again, at Jet Airways security is in the hands of 700 of its own security people. Forward transactions with fuel, or fuel hedging, is also prohibited. Only the state is allowed to indulge in this practice, and as a result fuel prices are horrendous. On top of this, all Indian carriers have to operate a certain percentage of unprofitable routes to remote parts of the country from their hubs out of social responsibility. “In our case, that is five routes,” says Peter Luethi. Despite this, the operation of Jet Airways, especially as regards customer service, is so impressive that even self-confessed fans of Lufthansa admit that the Europeans could learn a thing or two from this airline. The carrier from Mumbai is very much a part of the changes that Indian air transport is currently undergoing (see FLUG REVUE 8/2005). “We have always been a driving force there,” says Luethi.

However, the sudden new freedoms were quite a challenge for the management. Previously, apart from its flights to Colombo and Kathmandu, the airline had operated solely as a domestic carrier, but suddenly, almost overnight the big wide world stood open. There was no question of purchasing new aircraft for the new Asian routes. The existing Boeing 737-800's continue to be used on routes to Kuala Lumpur and Singapore, and later on will also fly to Bangkok, albeit in a new, more generous seating arrangement (120 seats in Economy and 16 in Business Class, with a seat pitch of 1.47m). On the other hand there was an urgent requirement for long-haul aircraft for the first intercontinental route to London, which was introduced at the end of May 2005, and for the planned New York connection via Brussels. There was no prospect of obtaining their own new aircraft from the manufacturers within a few months, so Jet Airways decided to take over three delivery slot for brand-new Airbus A340-300E's which had been earmarked for South African Airways (SAA). “We fly the A340 in Business Class with 38 seats which extend fully into the horizontal position, as at SAA,” says Luethi. As a “new entrant”, they were even allocated the necessary slots at Heathrow and are keen to present themselves in the best light on the European market, given that, thanks to the sometimes less impressive services provided by Air India, Indian airlines do not have the best reputation everywhere.

“Our target group is Indians living in Europe and the USA,” says Peter Luethi. They would also like to carry passengers who previously flew via the Gulf states. The limited Indian infrastructure does not yet permit a genuine hub to be established between domestic and intercontinental traffic in Mumbai, but at least the main routes will provide feeder traffic for the new long-distance flights. In 2005, the new international routes already accounted for between 10 and 15 percent of turnover. “My plan for the future is that our business should divide 50-50 between domestic and foreign routes,” says CEO Wolfgang Prock-Schauer. Chairman and proprietor Naresh Goyal, on the other hand, is a little more cautious. “I don't want to make the mistake of many American airlines of concentrating on international expansion to the neglect of the domestic market. Our focus remains the domestic business, which is growing at a rate of 25 percent a year.” At the same time Jet wants to increase the proportion of Indian businessmen among the 18 million international travellers from and to destinations on the subcontinent, currently less than 25 percent. Goyal is confident that they can change this.

To underline this point, Jet is investing $400 million expanding its fleet over the next two years by 17 additional Boeing 737-800's and 737-900's, ten of them to be purchased and seven to be leased. The first A330's leased from ILFC and configured with 226 seats in two classes are expected to join the fleet in May 2006. Then in April 2007 the first of ten A330-200's and -300's ordered at the Paris Air Show in June 2005 will follow suit. At the same time by March 2008 the new long-haul fleet will be boosted by ten Boeing 777-300ER's, also ordered in Paris. The airline has ten further options for each of the 777-300ER, A330-200 and 737NG. “By 2009 we will be operating a total of 89 aircraft,” says Prock-Schauer. One of the critical problems will be to recruit sufficient cockpit personnel, given the spectacular shortage of pilots in India. In three years' time the number of airline pilots needed will already have shot up from the present 490 to 1264. To satisfy the high demand, Jet Airways plans to found its own private flying school this year, which will churn out 150 graduates per year. Along the way to becoming a global player, Jet Airways is striving to extend its route network to up to four destinations in North America. Next summer there will already be three flights a day to London, one of which will be from Delhi. Other routes planned as part of the international expansion are to South Africa and China. After that, Paris and Birmingham and also a city in Germany are on the wish list. Jet Airways has only just begun its climb to dizzy new heights.

From FLUG REVUE 2/2006

Last updated 12 January 2006

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