Controlling non-fuel costs is a challenge: Amit Agarwal

Interview with Acting CEO, Jet Airways

Jet Airways posted a record annual profit of Rs 1,212 crore in 2015-16. The airline is using its cash flow to reduce debt and is optimising its network and reducing non-fuel expenses, Jet Airways' acting Chief Executive Officer Amit Agarwal tells Aneesh Phadnis. Edited excerpts of an interview.

Crude oil is now close to $50. Will you be able to sustain your profit growth?

Any hike in fuel price without a corresponding increase in fares will eat into margins. There is no perfect correlation between fuel price and fares. Often fare hikes come with a lag and depend on market forces such as deployed capacity.
 

We have an advantage over other airlines in a greater mix of international traffic, which provides us higher yields.

We are improving our fleet utilisation and undertaking cost reduction.

Why did your load factor fall in the last quarter?

In the fourth quarter of 2014-15, airlines benefited from problems at SpiceJet and thus from a year-on-year perspective, you will not see strong growth.

We also decided not to sell the cheapest fares.

Again there was some impact on passenger numbers and loads because of the Brussels attack. For a network carrier, the effect of such incidents is larger.

What is your plan to reduce non-fuel costs?

We have identified three areas — selling and distribution expenses, engineering services, and administration expenses — where there is a potential to save costs.

These are small items and the savings on each will not be in the millions of dollars but collectively it will be substantial.

We aim to increase our website sales. Currently, 16 per cent of our tickets are sold on our website and we aim to increase direct sales by 25-30 per cent.

We are reducing use of auxiliary power units in aircraft to save fuel, carrying aircraft paint jobs in house, and looking to source smaller aircraft components from approved suppliers within the country.

There are many costs that are dollar-denominated and there are contracts that see price revisions each year.

Whether the targeted savings will result in reduction in non-fuel unit costs is a question.

With the return of six Boeing 777s the focus is back on international operations. Also, do you a plan to be a part of Air France-KLM’s and Delta's joint venture on the Europe-US routes?

We plan to deploy Boeing 777s on routes to Europe and Canada. The A330 that fly on these routes will be deployed for the Gulf and Bangkok.

The shift from Brussels to Amsterdam has been beneficial for us and our partners but a joint venture agreement is not on the horizon.

Is there no plan to fly Boeing 737s on domestic routes this year?

There is no plan to take additional Boeing 737s on lease.

We have increased capacity through fleet utilisation and network rationalisation.

We will decide to lease more Boeing 737s if it results in revenue and profit growth.

Currently, about 50 per cent of our passengers travel onward on our and partner airline flights, and we have to ensure that capacity induction leads to strengthening of the network.

How do you plan to tackle the shortage of pilots?

We have daily operations of 630 flights and 1,600 pilots. We are hiring more pilots and we want to have a good bench strength of pilots.