airline business

Jet Airways Crisis: Workforce Reductions Begin

Jet Airways
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Jet Airways Conditions. 

Consider a general situation:
Jet Airways
Cochin to Jaipur next week air fare —
 
Indigo and GoAir : Rs 5000 to Rs 6000
Jet Airways : Rs 11500
 
Why should anyone choose Jet by paying double the normal fare? 
 
Both Indigo and Go Air are profit making Airlines but Jet Airways is buried deep in losses and debt!
 
Selling all seats at a consistent fair price appears to a sensible business strategy than selling a few seats at artificially hiked prices. 
 
Naresh Goyal’s Jet Airways has completed 25 years of flying this May. Since then Jet has seen nothing but bad news and piling up of losses. It has even been penalised for unfair business practices. (See: Unfair) 

Jet Airways, India’s second biggest airline, as of now.

7 of its planes are grounded at Chennai – 1 Airbus A330, 1 Boeing 777, 2 Boeing 737s and 3 ATR turboprops, and
 
1 Airbus-A330 is grounded at Mumbai. 
 
Jet Airways
The engines have been dismounted from some of these planes, signifying that they may remain grounded for six months or more.
 
Moreover, 8 to 10 planes undergo routine maintenance every day, which means a total of 16 – 18 planes are out of service at any given time. 
 
Jet still has a viable revival plan, but it needs to take some tough decisions quickly and maintain a sense of prudent business discipline in future.
A part of the reduced capacity is supposed to be replaced by the new Boeing 737 Max planes that Jet Airways has inducted. It has ordered a total of 225 and has got five of them. It will get six more by the end of this financial year. 
Jet Airways
Jet’s brand new, much more fuel-efficient narrow-body fleet of B737 MAX aircraft have been deployed in place of wide-body aircraft on certain domestic and international short-haul routes such as Singapore for gaining some cost advantage.

Workforce Reductions Begin

A few months back Air India did not have money to pay salary to its employees. Today Jet Airways is seen pruning its workforce and operations. It has also delayed salary payments several times this year. After a lull in September, the pink slips have started again.
 
At least 15 people at manager or general manager levels in engineering, security and sales departments  have been asked to leave in October. A few were elderly people. It is reckoned that more exits are likely. 
Jet Airways staff
Will I be fired?

The capacity and workforce cuts reflect Jet’s attempts to stay afloat, even though this results in ceding market share to competitors such as IndiGo, Spicejet and GoAir.   

As Jet battles its worst financial crisis; speculations have begun about Jet struggling with meeting lease payment obligations.
 
The airline’s salary expenses rose by 53% in the past five years, overtaking plane lease payments as its second-biggest expense after fuel which still account for an airline’s biggest cost chunk.
 
The airline told media that it continuously evaluates fleet requirements but didn’t comment on workforce reductions. In line with practices followed globally, the airline regularly reviews its network to address its capacity exposure to routes, markets, and airports. Jet also said it was rightsizing its ATR network to align capacity with demand characteristics. 

Concerns and Suggestions.

In a country where it is normally assumed that only Ambani or Adani can run any business profitably, the common man and 1000s of Jet’s shareholders are genuinely concerned about the state of affairs at Jet Airways. 
Jet Airways
It is the same market where Indigo is successful while Air India and Jet Airways have been huge failures. So the problem is not with the market or the fuel prices as is made out to be. Analysts believe that the chief problem with Jet is bad Management. It implements bad business models and takes bad decisions. 
 
Experts have suggested several measures for Jet Airways to come out of the red:
 
– Address the root cause. Stop business class and convert it completely to an LCC. 
 
Jet Airways flies generally empty business class, charges premium to economy class passengers to cover the loss. Thus, it loses out to Indigo because its fares are less.
 
Jet Airways
– Automate as much as possible.
 
– Try all female cabin crew as in Indigo. Let the girl power do the magic. 
 
– Try to replicate successful business models rather than expecting miracles from proven failed business model. 
 
– Be ready for a change and succeed or do not change and perish. 
 
For several years, Jet has failed to take any significant step to realign its cost structure in tune with industry norms.
 
Finally, today it seems nice that Jet is finally taking this essential but difficult step of capacity and workforce cuts. 

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