While Jet Airways is creating history, becoming the first Indian airline to stage a comeback after completely ceasing operations, it's not going to be an easy flight path the second time around — with new and stronger players now crowding the hangars.
The DGCA granting the AOC to Jet Airways means the airline, which remained grounded for more than three years, can resume commercial flight operations.
The regulator's nod comes after Jet Airways successfully completed all proving flights — the last step to obtain the AOC for an airline — on May 17.
But catching up in a race is hard, let alone overtaking, especially when you are picking yourself up after a fall. Jet Airways, which is re-entering the aviation industry race after remaining out of it for long, is staring at possibly bigger challenges, now that it has to compete against more and better participants.
Jet is aiming to return to the skies with its new promoters by the next quarter. The Kalrock-Jalan consortium, the new owners of Jet Airways, had recently sought an extension of two months to revive the air operator's certificate for the airline as it needed more time to complete the regulatory requirements.
The deadline to implement the revival plan of Jet had ended on March 22, forcing the promoters to seek an extension.
“There are certain expectations from the Jet brand. We not only intend to live up to those, but do better without compromising on the warmth, commitment to excellence in customer service, and sheer poise that defines the brand,” CEO Sanjiv Kapoor told CNBC-TV18 last month.
While the airline is creating history, being the first one to be revived after completely ceasing operations, it's not going to be an easy path after resuming services.
With Air India already sitting on a pile of debt then, Jet’s domestic rivals three years ago were primarily Vistara, IndiGo, SpiceJet and Go Air.
As the airline resumes services later this year, it is going to be a tougher battle in the skies, not just with the restored trust in Air India on Tata regaining its ownership, but also due to another player entering the market — which is bad news for the others as well.
Ace investor Jhunjhunwala launching his budget airline Akasa Air is likely to intensify competition in the aviation industry. Akasa, being a budget airline, and as promising as Jhunjhunwala’s stock recommendations, is expected to disrupt the low-cost carrier market. To retain their market share, airlines, including Jet, will have to roll out discounted prices. Considering Jet’s likely model, that also includes premium services, it may be already staring at one of its biggest challenges — managing costs in an intense price war.
Besides, Akasa may launch operations as early as in June — before Jet’s comeback— and so have an edge over the latter, because remember, in business, timing is everything.
Crowded international skies
Meanwhile, Air India’s vision is clear. The airline wants to expand its network, modernise its fleet, improve customer service and become a technologically-advanced carrier, as Chairperson of Tata Group N, Chandrasekaran said in his first address to the staff. Both Air India and Jet were crippled but what gives the former an upper hand in the game is that it continued to fly though with a life support system — the government.
Air India, working on the efficiency of its existing fleet and with plans to make the most of international operations, is already ahead in the game. Jet, on the other hand, is initially only focusing on domestic and short-haul international operations.
Additionally, IndiGo — which already dominates the domestic market — eyeing international skies makes Jet’s job of becoming a consistent market leader even more difficult.
ATF — a consistent concern
Compounding the woes are the soaring fuel prices. The cost of refuelling for domestic airlines has gone up to a record high of Rs 1,23,000 per kilolitre with the recent hike of 5 percent. This is a rise of more than 90 percent in a little over a year — from Rs 58,374 per kilolitre in April 2021.
Soaring prices of aviation turbine fuel (ATF) have remained one of the biggest concerns for domestic operations, with the rates ranging from 25 percent of total operational costs for a single-engine aircraft to up to 45 percent for large planes. Jet fuel rates are changed monthly in the country.
The Russia-Ukraine war has only made matters worse for the industry, with the international oil prices seeing a record increase, climbing to a multi-year high recently.
“Fuel prices are a huge challenge, but we hope that the price will subside. Historically, fuel prices have been cyclical, with spikes from shocks caused by global events. It’s a difficult time to be flying, but every airline is dealing with this problem. We believe that taking a longer-term view, there is white space available for a new, differentiated airline to succeed in India,” Jet CEO Kapoor had said last month.
Fighting for the reduced pie
IndiGo’s dominance of the market is only growing. In 2018, IndiGo, the industry leader, recorded a market share of 41.5 percent, followed by Jet Airways (13.8 percent), Air India (12.7 percent), SpiceJet (12.3 percent) and GoAir (9 percent).
IndiGo’s market share increased to 48.2 percent in 2020, while SpiceJet and GoAir also saw a marginal rise in their market share to 15.6 percent and 10.8 percent, respectively, in the year. Air India’s market share dropped slightly to 10.9 percent during the period.
Currently standing with over 50 percent of market share, IndiGo’s strong grip leaves other players fighting for only the reduced other half of the pie.
With the new players entering the market and the existing ones strengthening their strategies as the industry braces for a post-COVID revival, Jet is bound to face sustained rough weather on its second take-off.