Jet Airways To Axe Unprofitable Routes

Wednesday, 14th May 2014 at 08:46am

Jet Airways is now in the process of terminating services that are not making money for the airline, most of which are on domestic routes.

The airline, now the country's second largest in terms of passengers carried and market share, has been piling up losses along with other local Indian carriers, primarily due to weak demand and high-operating costs.

To mitigate its losses, the airline has come to its decision to terminate some domestic routes that are not profitable enough to keep them operating.

However, Jet Airways is looking beyond Indian shores across the vast Indian Ocean, specifically at the Gulf countries where demand is high enough.

To recall, Etihad Airways struck a deal with Jet Airways to purchase a 24% stake in the latter. The amount earned from these stakes was substantial enough to help the Indian carrier trim its losses and pay off its debt.

Jet has already terminated three domestic destinations including Tirupati, Visakhapatnam, and Vijayawada, all of which are in the state of Andhra Pradesh. An airline official said that they are moving away from less-profitable routes and focus on routes where demand is high to sustain long-term operations such as the Mumbai-Delhi sector. In fact, it is increasing frequency to this single route alone.

Based on the quarterly report of the airline, it posted a loss of Rs.267 crore during the last quarter of 2013 ending December 31, its fourth in a row�"this despite the year's peak season where many festivals and holidays are held during the period. A massive chunk of that quarterly loss, at a whopping Rs.260, was attributed to domestic operations. In contrast, its international operations contributed only a tiny fraction of the loss, at Rs.8.2 crore.

The amount it earned for the 24% stake purchase by Etihad will be used in aircraft acquisition to grow its fleet as it plans to expand its route network overseas.

The airline also admitted that the domestic market has been its sore spot as it is primarily dominated by low-cost carriers, one of which is its own budget subsidiary, JetLite.

Its partnership with Etihad will focus mainly on international operations of both as they are more lucrative to operate. For instance, it is adding more routes connecting Abu Dhabi, also the hub of Etihad Airways. At the same time, Jet will feed Etihad's international network from its hub in Abu Dhabi.

By: Pete Lee.