When flights are delayed, as it happens often, one can never miss the commotion near boarding gates. There have been instances when the commotion soon turns into a
gherao (encirclement) of the airport staff. Passengers demand answers. When is the flight scheduled to leave? Why the delay? Why weren’t other arrangements done? The situation could turn nasty if another airline’s flight departs for the same destination! Chorus of Protests
The common chant among passengers at the end of such instances is “never again”. There is an almost chorus of voices saying,” I will never travel this airline again”.
Airlines in India have gone through periodic cycles of troubled times. In 2008, it was GoAir – struggling to make ends meet, cancelling flights, changing network and trying to maintain its skeletal schedule. In 2012 it was Kingfisher – going through the same jugglery to see how best the airline can be saved. Tt wasn’t to be. The story repeated in 2014 with Spicejet on the brink of collapse and rising again.
It’s 2018-19 and we are facing the similar experience with Jet Airways in terms of abrupt cancellations, skeletal schedule, aircraft grounding and a lot more. The situation is complicated with IndiGo – the domestic market leader, also cancelling flights, blaming the disruption first on the unseasonal storm, only to realise that the market cannot be fooled for long and admitting that they have miscalculated the number of pilots and that about 2 percent of its schedule will be cancelled until the end of March.
But it is Jet that is bearing the brunt of passenger ire. The tone at the airport, social media and fellow passengers while travelling Jet is the same — hostile. Flights are being cancelled at the last minute as aircraft after aircraft is getting grounded by the lessor for unpaid dues or by the airline for lack of funds or at times for maintenance of other aircraft – X’mas tree in aviation parlance.
Work trips, holiday plans and visiting friends and relatives (VFR) traffic are all impacted by these cancellations. Worse, Jet Airways is not helping passengers re-book, instead it is offering a refund, making the trip expensive for the patrons since last-minute fares have skyrocketed.
While the airline has been slipping rapidly, with close to 50 aircraft grounded at last count, there is a general feeling that the airline won’t go down in an election year with the banks – which are now the majority partner — and Etihad, the equity partner, will shore up all the resources needed to keep the airline flying. The question remains on how the airline will attract its patrons again.
No matter how many times passengers say they are disgusted with an airline’s service, remember that India is a country driven by lower costs. Few people are as price conscious as Indians. From corporates to individuals, the preference for lower cost is unmistakable with a small percentage of this being the niche traveller. Up to 68.1 percent of all domestic passenger traffic in India was carried by low-cost carriers in 2018 and the space for full-service carriers is shrinking with every passing year.
Until Jet Airways recapitalises and when it does, it will have to still try ways to boost market confidence. This is a long-drawn exercise, which is also expensive. Majority of the travel, even today, is driven by corporate deals and fares. Jet’s troubles mean that corporate clients have deserted the airline now. This can only change with deal sweeteners for corporate houses.
Even the low-cost carriers offer free meals to corporate fares; so getting the frills back may not do the trick for the general public. To boost the confidence of passengers will need much more than that tactic.
Look at Spicejet, the last airline to come to the brink. The airline operated 5,982 flights in December 2014 – its worst month and the month it changed hands. In January 2014, the airline started with 9,677 flights. It was not until May 2017 that the airline crossed its January 2014 record, launching 9,748 flights that month.
However, in the five months leading up to the crisis, Spicejet recorded a load factor of over 80 percent each month. The airline has been clocking a load factor of over 90 percent each month since May 2015.
Is the airline back? Definitely! Going by the stock exchange filings, the airline had repaid its dues to vendors, airports and other creditors and all loans are now normal with periodic payments.
The Cost Factor
Market confidence comes at a cost and sometimes that cost could be too heavy to pay as was the case with Kingfisher. Jet Airways could be forced to dilute its fares to an extent where customers find it attractive enough to book the flights and risk repeating the cancellations or delays which it has faced in recent past.
Apart from this, the airline definitely has to take care of its on-time performance and cancellation rate and make huge marketing campaigns to not just the frequent fliers of the airline but also the travelling public, in general, to woo them back and state emphatically that it is back in the game. All of this comes at a cost. There is a point beyond which one cannot bear that cost, because it’s escalating costs that made sustenance an issue for an airline in the first place.
In the first quarter after the Spicejet crisis — it was the fourth quarter of FY15 —the airline reduced average fare by 20 percent from a year ago while the costs per available seat kilometers (CASK), a measure of unit cost, reduced only 10 percent over the preceding quarter.
In a country where people are loyal to nothing else but low fares — only a niche exists for premium services — it is definitely possible for an airline to come back. For an airline, the comeback phase is only a battle. It is the return that will be a war with a resurgent competition trying to stifle it further. In other words, equity infusion is only a lifeline.
Ameya Joshi is founder of aviation analysis blog NetworkThoughts.