Job cuts, fewer slots in McKinsey’s revival plan for Jet Airways

Forum Gandhi Mumbai | Updated on May 21, 2019 Published on May 21, 2019

Police try to rein in protesting Jet Airways employees outside the Rajiv Gandhi Bhawan, which houses the Civil Aviation Ministry, in New Delhi on Tuesday   -  PTI

Consultancy pitches for trimming costs all round to make airline competitive again

McKinsey & Co, which is advising both Jet Airways and its lead lender SBI on reviving the airline, has suggested that the private carrier will need 60-70 aircraft post restructuring.

McKinsey has also pointed out that the complex combination of fleet was increasing its cost of maintenance before the airline was grounded.

According to sources privy to the discussion, an internal mail was sent to the pilots after a meeting held on May 9, stating that on the basis of “discussion with McKinsey”, of the current strength of 1,000 pilots, approximately 150 would not be required. However, the requirement could completely change when the new owner takes over the airline.

Declining numbers

Jet Airways’ employee strength has already declined to 11,500 permanent employees as of April, from about 16,000 at its peak.

The senior management of the debt-strapped airline has reached out to multiple airlines and other companies to get the employees re-hired.

“We are trying to place our colleagues in other airlines and other industries,” said a top official close to the company’s human resources department.

“While there are a lot of individuals who would like to stay with the airline, we have received several requests for job opportunities. There are companies who have reached out to us and we are trying to get them absorbed. Over 1,000 pilots, cabin crew members and other employees have been absorbed by other airlines and companies.”

One source added that McKinsey had pointed out three or four other things that needed to be addressed from a cost perspective.

“The ratio of employees-to-aircraft needed to be addressed,” said the source. “The average cost per employee, which is higher than the industry standards, will be addressed after the resurrection because it is critical, too.”

Lesser fleet variety

“There is a view that lesser variety in the fleet will also reduce the requirement of type-rated engineers and pilots along with reducing the amount of spare parts,” the source added.

Industry standards for maintenance-to-total cost is about 11-12 per cent. At Jet, it was at 15 per cent because of the fleet complexity. The person added that McKinsey had pointed out that the total Revenue per Available Seat Kilometre (RASK) is over 20 per cent, whereas the Cost per Available Seat Kilometre (CASK) is 36 per cent, well above other carriers. On the number of slots for the airline, the consultancy firm has suggested that at least 60 should be retained, compared to the earlier 120.

Shares rise on hopes

Meanwhile, a PTI report said the diversified Hinduja Group is evaluating opportunities to invest in Jet Airways. Jet shares surged 14.73 per cent on Tuesday after the Hindujas released the statement, closing at ₹150.75 on the BSE.

Employees of Jet, meanwhile, protested outside the Civil Aviation Ministry in New Delhi, demanding the revival of the airline and payment of their pending salaries.

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Published on May 21, 2019
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