While the aviation industry suffers globally, the setback to Jet Airways in terms of losses incurred by the airline over the past two years has now forced the airline to undertake massive restructuring.

Early this year, the Jet Airways management sat down on the drawing board, mulling over various restructuring strategies. Several scenarios were explored, one of which included selling off the low-cost arm Jet Lite, said a senior Jet official on the condition of anonymity. “It was decided to form two different verticals, cargo and international, after selling off JetLite,” said the official. Owing to the sparring with Sahara, it had to retain JetLite, so another strategy was evolved — positioning Jet Lite as a domestic carrier, Jet Airways as the international arm and a separate vertical for cargo.

Even though Jet Lite, aviation experts say, is gradually turning the corner, its cost structure is still a cause of worry for Jet. Of the Rs 961 crore consolidated loss for 2008-09, Jet Lite, Jet Airways’ wholly owned subsidiary, accounted for two-thirds. While the overhead operational costs for full service carrier Jet Airways and low-cost Jet Lite remain almost the same, Jet Lite’s gross revenues per passenger are half those of Jet’s. Given that the yields are lower in no-frills flying, carriers need higher passenger load factors to break even. Jet Lite, which needed 93 per cent passenger load to break even, could manage only 68 per cent.

The management, sources reveal, has also toyed with the idea of a low-cost international carrier, modelled on the success of several low-cost international carriers such as Air Arabia and Ryan Air. However, as experts point out, low-cost international flying is mostly restricted to less than 4-5 hours of flying. Jet Airways’ spokesperson said that the airline will look to connect the existing international destinations in its network with additional gateway Indian cities, while closely aligning growth with demand in the domestic sector. The airline’s inability to take on competition stems from the fact that Jet Airways is a product of non-competition, Centre for Asia Pacific Aviation CEO Kapil Kaul points out. “The reason why Jet is in such a position today is because Jet never faced the kind of competition it should have. Within four years of its launch, other airlines shut shop. Jet is now searching for a new business model relevant in the current market,” says Kaul. This model has to look at several initiatives, including trimming the manpower costs, which Kaul accedes may be difficult in the current scenario.

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