Jet Feeder Plan On Hold, Focus On Fleet Expansion

Jet Airways has decided to shelve its plans of moving into feeder services. Instead, the airline will concentrate on its $486 million fleet expansion which it expects to complete by 2002.

Feeder services have been ruled out as an immediate option primarily because of the economic non-viability of the existing feeder routes.

Saroj K Dutta, executive director, Jet Airways that launching a feeder service would necessitate major investments in aircraft as well as infrastructure which is not viable now. Dutta also ruled out the possibility of Jet entering into feeder operations through the acquisition the Suchanti-owned Gujarat Airways.

However, with the winding up of the $486 million fleet acquisition project, there was a possibility of looking at feeder operations as a natural step towards growth in the domestic aviation market, he said. According to company sources, Jet Airways will not completely rule out feeder services because the move would not make economic sense considering that the trunk routes at present have become saturated with too many players.

 

Moreover, operating on feeder routes also gives the airline the opportunity to fulfill the DCGA's ASK norm, sources said.

The airline is negotiating with the US Exim bank and some commercial banks for rustling up the $400 million which will be used for financing 10 Boeings that Jet plans to buy. The financing will be routed through foreign loans to avoid the high interest Indian rates. We will be availing of the foreign loans at a rate of below 10 per cent whereas the domestic rates are as high as 17-18 per cent, said Dutta.

The 10 Boeings which are slated for acquisition will be a mix of four 737-400s and six 737-800s. The first 737-400 will be inducted into the fleet by November this year while the first 737-800 will be inducted sometime in December 1998. The first category has a seating capacity of 136, while the second category will be 160-seaters.

Jet's forex earnings during 1996-97 increased 24 per cent and is expected to be enhanced further when the new aircraft become operational.

The airline at present has a fleet of 12 aircraft which will increase to 18 by March next year.

There are also plans to increase routes with the aircraft additions. In order to further strengthen its market position Jet also plans to enter into more marketing and technical agreements with foreign airline majors, he added. The airline already has a series of marketing agreements with British Airways, the world's largest airline.

Dutta ruled out the possibility of the airlines' growth prospects receiving a setback with the dilution of its foreign equity holding, which is due in six months.

Gulf Air and Kuwait Airways hold 20 per cent each in Tailwinds, the holding company of Jet Airways, which is registered in the Isle of Man.

Naresh Goyal and some NRIs are the majority shareholders of Tailwinds.