With rising crude oil prices severely impacting airline profitability, carriers are now drawing up big plans to bring down costs. Market leader Jet Airways is looking to cut expenses by around $50 million this financial year, while others like state-run National Aviation Company of India Ltd (NACIL) and no-frills carrier SpiceJet have launched their own cost cutting initiatives.

Since fuel contributes between 40-50 per cent of an airline’s operating costs, most of these carriers are trying foremost to optimise their fuel utilisation. Jet Airways, which commands 30 per cent domestic air market share, has adopted an optimised fuel efficiency policy through which a flight can carry the lowest possible fuel to reduce the weight of the aircraft. It has also devised a computerised fuel tankering policy which allows it to compare fuel costs at different locations and accordingly refuel.

Similarly the Air India-Indian combine — NACIL — is also looking to reduce costs by refueling at international destinations to which it operates. SpiceJet, which has a 10 per cent market share, is also refueling in states that have a reduced sales tax on aviation turbine fuel (ATF), like Karnataka. “We purchase 10 per cent of our total fuel at the new Hyderabad International airport, where sales tax on jet fuel stand at a modest 4 per cent, compared to 32 per cent in other parts of the country,” says SpiceJet chief financial officer Partha Basu. “The cost cutting of $50 million will compensate for only 30 per cent of the increased jet-fuel costs,” Jet Airways CEO Wolfgang Prock-Schauer had said. Hence, the carriers are also looking at other ways to mitigate expenses. Jet, for instance, plans to increase the number of hours that its wide-bodied planes fly every day, from the current 10-12 hours to 14 hours. It also plans a reshuffle among its pilots by allowing first officers to become co-pilots. SpiceJet too is keeping a close look at loss-making routes so that it can prune its flights to unpopular destinations.

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