Jet's low-fare lollipop

Market pundits may be splitting hairs over Jet’s second low-cost service, launched on May 8, but the airline seems to have made the right connect with travellers. Jet Konnect’s booking volumes surged 27 per cent with the addition of new services on May 20, which has come as a boon for the Naresh Goyal-owned airline in the face of falling passenger volumes.

With 60 Konnect flights daily, Jet’s one-fourth capacity now comes from low cost. “We are buoyed by this good response and evaluating other domestic routes for conversion to Konnect,” says Sudheer Raghavan, Chief Commercial Officer, Jet Airways. But the question that has baffled most is: why another low-cost brand when JetLite is already around? Apparently, Jet could not have transferred its surplus capacity to its lowcost cousin without first sorting out regulatory hurdles. Another reason could be issues with the owners of the erstwhile Sahara, which is now JetLite. But Raghavan would not admit as much. Instead, he says: “As all JetLite aircraft are successfully deployed at the moment, it would not make any sense to redeploy them to new routes. Hence, we designed a flexible rapidly-deployable, singleconfiguration, no-frills economy service using Jet Airways aircraft and crew.’’

In the 12 months since April 2008, Jet not only lost about 2.77 lakh passengers, but also its leadership position to Vijay Mallya-owned Kingfisher Airlines, which was ahead of the Jet combine by 1.9 per cent in domestic market share, as of April 2009.

Why another low-cost? Jet’s other low-cost carrier, JetLite, is a separate entity Regulatory hurdles in transferring surplus capacity to JetLite Possible issues with former owners of Sahara, now JetLite

When losses appeared irreversible, Mallya tweaked his fleet to shift more aircraft to Kingfisher Red to tap the low-cost market. Jet lacked such flexibility with JetLite being a separate entity. “Konnect is a service launched in response to a demand for a low-fare service on some existing Jet Airways domestic routes. These are routes where we have seen our seat factor fall by a larger margin than the actual fall in demand,” says Raghavan.

Industry experts, however, are divided in their opinion. “Konnect will stimulate some demand, but not profits because the services are offered within the cost structure of a full-service carrier,” says Kapil Kaul, CEO, South Asia of Centre for Asia Pacific Aviation (CAPA), an aviation consultancy firm. He feels it’s better to put more capacity on JetLite in view of its more competitive cost structure. But Mahantesh Sabarad, Senior Analyst with Centrum Broking, sees the experiment as a positive move to bring down cost, except that, as he says, “Jet could have achieved the same under its own brand by introducing more ATR in the fleet.’’

But with the Jet management hinting that the new brand will go once the economy recovers, it is not a bad gamble considering that low fare is any day better than no fare.