Air Sahara now becomes Jetlite

Jet Airways today said that it would run Air Sahara as a 100 per cent subsidiary under the brand name of Jetlite. Jetlite would be positioned as a value carrier between a full-service and a low-cost carrier.

Jet Airways Chairman Naresh Goyal said Jetlite would be profitable within a year because of lower unit cost arising out of synergistic use of available resources. While the frequent flier scheme of Jet Airways' passengers would be extended to Jetlite, Air Sahara frequent fliers would be converted into Jetlite frequent fliers very soon. Goyal said Jetlite, on behalf of Jet Airways, would take delivery of 10 Boeing B737 aircraft that Air Sahara had placed orders with US-based aircraft manufacturer Boeing Company.

"We are planning to renegotiate with the lessors of aircraft of Air Sahara for better rates. We will derive benefit out of the commonality of fleet and synergies out of sharing engineering support, infrastructure at airports, flight despatch, network rationalisation and maintenance costs," Goyal said.

Jet Airways and Jetlite will have two different business models. Jetlite will operate as an independent carrier with its own operating permit. It will have access to available traffic rights for international operations. "Jetlite strategy would be based on the successful business model of the world followed by South West and Jet Blue," Goyal added.

Jetlite will have less frills with all economy-class details. At present, there is no value carrier in the country. Airlines such as Paramount Airways and the yet-to-be-launched MDLR Airlines have exclusive business class configuration.

Jet Airways Executive Director Saroj K Datta said the details of the value carrier model were yet to be finalised.

Industry analysts pointed out that though there was a positive aspect about synergy of operations, it was not clear about the positioning of Jetlite.

Commenting on the new business model, G R Gopinath, managing director of Air Deccan, the second largest airline and leading budget carrier, said: "It is surprising that someone who used to say that costs for all airlines are the same and 90 per cent of the cost for all airlines is inflexible is now going for a low-cost carrier. I think it will not work, as it will only cannibalise Jet Airways' economy class, where about 20 per cent of the seats are already available at LCC fares."

"Many airlines across the world have tried this experiment when they lost market share to LCCs, but they failed. British Airways started "Go", but found that it was losing its economy class passengers.

KLM did the same, but ended up with the same fate. Revamping the planes which have economy and business class to only economy class would cost around $200,000 to $300,000," Gopinath added.

"Moreover, the employee-per-aircraft ratio of Air Sahara is also high when compared with that of Jet Airways. Jet will have to make drastic reductions to reduce its cost," said Gopinath.

But Goyal has a different argument. "The network of Air Sahara would supplement Jet Airways' passengers. Jet Airways would be getting more frequent fliers. In the case of any flight disruption, a 100 per cent subsidiary will make sense," he added.

Ajay Singh, director of SpiceJet, a Delhi-based budget carrier, said: "Air Sahara was already discounting its tickets to even below our fares. Therefore, Jetlite might have a stabilising factor, but it will only eat into Jet Airways' share. Jetlite will never affect SpiceJet, as our prices will always be lower than Air Sahara's."

However, Jet executives said the airline would have one-third of market share with Jetlite at a time when new players were inducting more capacity.

At present, Air Sahara has 27 aircraft with an average fleet of over 8 years. Of the total fleet, seven are on ground and are undergoing heavy maintenance schedules.