Jet Airways to raise capacity in low-cost segment

Jet Airways plans to increase its capacity in the no-frills segment. It is also looking at various means to cut costs and improve efficiency, which includes increased use of information technology and lower distribution costs, as high fuel costs dented its profits.

The airline posted a consolidated loss of Rs 128 crore in the first quarter of 2011-12.

"Jet Airways is not a dogmatic carrier. We will respond and change according to market conditions,” said Sudheer Raghavan, chief commercial officer, after the the company's annual general meeting on Wednesday.

About 72 per cent of the airline's capacity, which includes its subsidiaries JetLite and Jet Konnect, is deployed in low-cost category and Raghavan expects this to grow. "It is my gut feeling that 85-90 per cent of the capacity will be in the low-cost medium in five years or before,'' he said.

The airline is considering introducing low-cost service on short-haul international routes. It also wants to merge low-cost subsidiary JetLite with Jet Konnect, but has not firmed up plans.

"It is estimated that around 70 per cent of the capacity of the Indian domestic market falls in the no-frills low fare segment. As a result, the fares offered by the full-service carriers have dropped to match those offered by the new low-fare no-frills carriers. This has resulted in high growth rate with sharp drop in yields and escalation of the break-even seat factors. These developments have brought into question the viability of the full service business model,'' Jet Airways Chairman Naresh Goyal said in his speech to share holders.

The group, however, clarified it will have both the low-cost and full-service brands. The airline is expanding on international routes with new flights to Manila in the winter.

"We are addressing the issue of cost structure,'' Raghavan said, adding that the management was focussing on issues such as employee productivity, use of information technology, reducing overheads and distribution costs.