Winners, losers and fence sitters

The downfall of Jet Airways has produced at least one long-term winner, one short-term gainer and a few fence sitters

Even as the industry mourns the downfall of Jet Airways, there are winners, losers and a few fence sitters emerging from the episode. Passengers — like employees — were among the biggest losers as airfares skyrocketed. To cite one instance, the return flight between Dehradun and Delhi (30-minute-flight) was Rs 14,000 and Rs 21,000 on two different days last week. I decided to stay home!

Jet’s shutdown led to a shortage of capacity and vacating of routes, freeing-up of airport slot timings and an oversupply of Boeing commanders, first officers and cabin crew. Moreover, almost the entire Jet fleet that was on lease is available for any taker. Like vultures swooping in on a dead corpse, the players have quickly cornered as many slots as they could, hired the best of Jet staff and some have taken aircraft. 

In the short term, SpiceJet appears to be the biggest gainer. The airline is taking 22 of Jet’s aircraft, has gained 122 slots so far and has hired around 1,000 ex-Jet pilots and crew. Unlike others who have been silent on their conquests, SpiceJet’s steady stream of announcements on new flights have attracted the ire and envy of many. Its chief Ajay Singh has even been labeled the “Naresh Goyal” of the moment on social media. 

But all’s fair in love and war, as I see it. What I find more worrying is the fact that the airline suddenly has on its hands a whole bunch of aircraft with a configuration quite different from its usual. Unless the airline can charge a premium for these seats, the cost per available seat kilometre (CASKM) will rise. When I asked Singh, he said the airline will be offering a business class product on trunk routes and international sectors from May 11. Whether this turns out a calculated risk or a reckless one, time will reveal.

A second concern with this kind of sudden expansion is what happens if the oil prices don’t play ball? In the second quarter of 2018 -- when oil prices rose and the rupee weakened -- IndiGo and SpiceJet reported losses of around Rs 650 crore and Rs 390 crore respectively. So while it’s nice to make hay when the sun shines, a rainy day can reverse the fortunes rather quickly. The larger you are, the higher the price you pay.

The neither here nor there airline —GoAir — too managed to get some slots out of those vacated by Jet but what it hopes to do with them is anybody’s guess. I for one have lost count of how many people have resigned in the last six months but I do know that the airline is as rudderless as ever. In fact, things have been so grim since this February that the airline has been struggling to keep its full fleet in the air, let alone add new capacity. 

There were unconfirmed reports that Vistara was thinking of taking up to 10 B737-800s from Jet’s lot. Now, this sounds rather rash to me. From my limited understanding of this business, it makes almost no sense to bring in a second type of aircraft in your fleet — even on a wet lease — for all the other complications that operating a mixed fleet bring with it. That too for just 10 planes! 

In fact, if I were Vistara, instead of worrying about today, I’d be focusing on tomorrow. Kingfisher, Jet and even Air India’s record would be giving me the jitters. A more existential question has arisen: Can a full service airline in India actually succeed? Is India some kind of aberration where only a low-fare model can thrive? Do I need to find some innovative way to withdraw from domestic routes and leave that bit to the likes of Air Asia India? It’s time for some real introspection here. 

In the final analysis, I wouldn’t be surprised if the biggest long-term gainer from the Jet episode is again the market leader IndiGo. The airline is adding almost one aircraft a week in any case. It has taken whatever slots it could and hired as much of the Jet staff as it required. It’s sticking to the knitting as far as possible. In a business like aviation, that’s almost always the best route. 

PS: Interesting addendum: Poor old Air India got no slots as it has apparently no aircraft to add and the government is allotting slots only to players who add new capacity