JetLite draws on synergies to cut costs

Plans to reduce fares by 9% over a period of five years.

JetLite, the erstwhile Air Sahara which was acquired by Jet Airways in April 2007, is all set to clock a turnover of $460 million for the year ended March 2008, according to outgoing CEO Gary Kingshott.

However, it is yet to break even.

"That is linked to when we can get all our planes to fly. We were hoping to do that by January. We need to get two more planes off the ground, and we hope to do so in the next 45 days," he said.

The Australian CEO, who was deputed from Jet Airways, is towards the end of his two-year contract.

The airline plans to reduce fares by nine per cent over a period of five years to strengthen its position as a value carrier and compete more effectively. This would come by way of achieving lower costs by drawing synergies with Jet Airways.

JetLite has reduced its cost per available seat km (CASKM), a measure of unit cost for airlines, from Rs 4.30 per seat km when Jet acquired Air Sahara to Rs 2.90 per seat km.

Budget carrier Spicejet has the lowest CASKM at Rs 2.50, a figure which should come down with further growth, said an industry expert.

Full-service airlines and low-cost carriers belong to separate worlds. What JetLite is trying to do is more ambitious "" morph from a full-service airline to a low-cost carrier or, what Jet Airways chairman Naresh Goyal calls, a value carrier.

"We are proving that it is possible, but much more difficult. It's not difficult to reconfigure the aircraft, do away with the frills, but here you are dealing with cultural shifts. Today, our employees think, behave and respond differently than when they were with Sahara," said Kingshott.

Many of its employees are multi-tasking as can be seen in many smaller airports. The same set of people could be manning ticket offices, check-in counters, boarding gates and step ladders.

At present, JetLite has 11 people to take care of Boeings at smaller airports as against the 20 hired by Sahara.

The efforts to reduce costs and increase productivity are best visible in the way it has rationalised pilot salaries. According to the old contract, pilots were required to fly only 50 hours a month or 600 hours in a year, which was out of sync with the rest of the industry. Regulations allow pilots to fly 1,000 hours in a year.

Now, pilots in JetLite are required to fly 75 hours a month or 900 hours in a year for the same salary.

''Most pilots in the industry would be flying 75 hours. We are just bringing them in line with the market. The norm in Sahara was out of sync with the market,'' said a senior executive of the airline.

Jetlite now needs more pilots as it gets more planes to fly.

"For the same money, we can now get 50 per cent more flying hours. The other alternative was to get 50 per cent more pilots. That's where the saving comes,'' added Kingshott.

Kingshott said that average yield in February has improved to around Rs 3,600 though yield were lower in January.