Jet Airways to Increase Auxiliary Revenues
Monday, 4th June 2012 at 04:14am
To make up for huge losses they incur due to rising fuel costs, Jet Airways has devised a way to keep afloat by increasing its auxiliary revenue. Thus they require their passengers to pay for preselected seats and improved in-flight services.
Some senior executives from the airline company told analysts that it also plans to reduce the cost of ticket distribution by 100-200 basis points by restructuring the commission of their agents and collect an additional charge from passengers flying to Delhi in conjunction to the airport's expanded fees.
In 2011, the estimated global revenue of airplanes on ancillary services and products was $32.5 billion. The highest share in the worldwide ancillary revenue came from America. The ancillary revenue varies from one airplane to another and from what country. The revenue made by the airplanes in a particular country may also differ, depending on their own sales strategy. So that the ancillary revenue for a particular airplane may comprise 18-20 percent of its total revenue. On the other hand, the ancillary revenue of one airplane may only contribute just a mere 2 to 5 percent of its total earnings. In Jet Airways' case, it's less than 2 percent of its total revenue.
Sudheer Raghavan, the airline's chief commercial officer said that up to $40 per passenger the airlines may earn from ancillary sales. This business model has compelled many airlines to adopt the system. Although he declined to reveal any specific plans for his airline, he hinted that an airline can raise revenue by requiring passengers to pay their preferred seats among other things.
The airline disclosed its loss for the 4th quarter of 2011-2012 fiscal year at Rs 354 krore, or an increase of 77% over the previous year.
The airline was unable to recoup its losses despite its successive implementation of a fare increase within the period. It is expecting, however, to fully benefit from the current quarter's fare increase. It is also considering to bring down the number of its current fleet of 101 to 95 narrow-bodied aircraft.
In order to get fresh capital, the airline is planning to leaseback 12 of its Boeing 737 aircraft which it hopes to raise $200 million.
By: Pete Lee.