Jet Air to pursue discount strategy

Full service airline Jet Airways has reiterated that it will offer 50 per cent of total tickets at discounted rates despite intense fare competition driving down yields.

Jet Airways will keep the full fare-discounted fare mix at 50:50 for the time to take on competition from other players including low-cost airlines.

"Yields from domestic and international operations will continue to remain under pressure. But we hope the fuel surcharge will help to mitigate the impact," said a senior Jet executive.

Following the escalation in fuel prices, Jet had levied a fuel surcharge of Rs 300 on all fare levels on domestic routes, effective May 1. Jet had 9.56 million revenue passengers in the last fiscal.

The airline is also planning to unveil a new product for its domestic and international travellers, which would be declared in the next couple of weeks.

"There will be structural changes in seats and comfort for our travellers. These changes will be implemented soon," he said. Jet will also induct eight additional aircraft this fiscal, including five Boeing B-737s for domestic operations, two Airbus A-330s and one B-737 for international operations.

"Jet Airways has earmarked Rs 11,000 crore as capital expenditure for acquiring 30 aircraft. Towards this, we will float a $500 million foreign currency convertible bond by May 31 followed by a follow-on public issue of $300 million," he said.

Over 15 per cent of the total aircraft acquisition cost would be raised from loans from overseas export credit agencies, he said.

Meanwhile, Jet will consolidate operations on the UK and Asean routes. "The airline is planning to start second daily Mumbai-London Heathrow and Amritsar-London daily from July. India-Bangkok service is likely to launch from October," he said.

A senior Jet Airways executive said the international operations incurred start-up losses of $38 million owing to lower yields, especially Mumbai-London and Delhi-London.

"Coupled with increasing fuel costs, pressure is likely to continue on yields as competitors are on aggressive fare discounting and capacity enhancement, particularly on UK routes," he said.

However, established routes such as Mumbai-Singapore and Chennai-Kuala Lumpur are turning profitable and maturing.

Jet Airways is now looking at successful integration of Air Sahara operations to improve productivity and efficiency of operations.