Airline analysts and the founder of the country’s first low-cost airline have said that the full-service carrier Jet Airways should consider going the low-cost way to sustain itself.

Jet Airways is witnessing one of its most turbulent times since its launch in 1995. The airline posted losses of ₹636 crore during FY18 on revenues of ₹24,510 cr. During the fourth quarter of that fiscal, it posted losses of ₹1,040 cr on revenues of ₹6,326 cr. For the first quarter of the current fiscal, losses widened to ₹1,326 cr on revenues of ₹6,257 cr. The airline also has the unenviable record of posting losses for five out of the last eight years. Its total debt is ₹8,150 crore as of March 2018.

“Jet should completely overhaul and merge all operations into one LCC (low-cost carrier) if it wants to survive,” G R Gopinath, founder of the country’s first low-cost airline Air Deccan, told BusinessLine . His argument in favour of an LCC model is simple: The full-service business model in the domestic sector, where flights are typically between one and three hours, the CASK (cost per seat km) is higher than the RASK (revenue per seat km). In Jet’s case, it earns ₹4.21 per km from every passenger but spends ₹4.49 per km to earn it, resulting in a loss.

It is not just the amount of money that Jet spends on getting a passenger on board, its sales and distribution costs are a way higher than the industry norm. Most airlines spend 2-4 per cent of their revenues on sales and distribution whereas Jet spends 12 per cent. With the fare structure of LCCs and FSCs blurring and not much to differentiate between the two, Jet like, Air India, finds it difficult to charge a premium and hence the reason for getting into a sticky situation.

Air Passenger Association’s president, D Sudhakar Reddy also believes that Jet should change its model to low-cost. “It is time Jet looked at the low-cost model seriously at least in the domestic sector. When you introduce buy-on-board meals, you are nothing but a low-cost entity. I had also tweeted the same to both the civil aviation ministers. They need to redefine the LCC and FSA models,” Reddy said.

But some oppose the change of the business model. Satish Modh, a leading researcher in the field of business ethics and strategy and a former general secretary of the Aircraft Maintenance Engineers Union, said with multiple aircraft types, it will not be viable for Jet to turn into an LCC as the maintenance cost will be high nor can the utilisation of the flying and cabin crew be optimised. “The only option for it is to rationalise its fleet structure.”

Another analyst, Devesh R Agarwal, said there is a possibility that the airline will look for some government concessions which may not come through as the other airlines too might want similar benefits.

An analyst with an international airline consultancy firm pinned Jet’s problem to neglecting the domestic business for a long. “We are surprised with the levels of losses in last six months. Fund infusion and cost rationalisation efforts are unlikely to be sufficient if such large losses continue,” he pointed out.

While a detailed questionnaire to Jet did not elicit any response, this paper spoke to a few former executives of the airline who said the carrier should try to raise funds by shedding equity instead of raising more debt.

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