Jet Airways cuts capacity on overseas routes, in talks to delay new deliveries
30 Jul 2008
India's largest private carrier, Jet Airways (India) Ltd, has begun cutting capacity on overseas routes in order to battle rising costs. The carrier has substituted its new, 479-seater Boeing 777 plane with an Airbus 330, which carries 335 passengers on the Brussels route. Jet chief executive officer, Wolfgang Prock-Schauer, taking a conference call said the carrier will now fly a Boeing 737, which seats 189 passengers, to Kuala Lumpur, instead of an A330.
The carrier yesterday said that profit had increased fivefold after reversing a depreciation charge.
Its cost cutting measures come as it continues to battle falling demand and rising fuel costs. ``In the lean season and in a high-fuel-cost environment, the savings on variable costs on operations will significantly outweigh the fixed cost on the ground,'' Prock-Schauer said. ''We will have some aircraft capacity on the ground in the short term.''
Prices of crude oil have dropping more than $25 a barrel, or 17 per cent, from their July 11 record of $147.27 would positively impact Jet in the second quarter. ''Crude oil prices have cooled off to some extent and this will impact our numbers for the second quarter,'' Prock-Schauer said. ''The capacity reduction and the move to raise fares and fuel surcharges will help overall revenue to go up.''
Amongst other measures, Jet expects net yields to rise after the withdrawal of a 5 per cent commission paid to travel agents, Prock-Schauer said. Travel agents account for 80 percent of the airline's business.
The carrier also has room to increase fares further by 10 per cent, raise fuel surcharges and lower catering costs, Prock-Schauer said.
He also said that talks were on to reduce lease rates on aircraft.
Jet is also in talks with Boeing to delay delivery of two 777s due next winter by one year.
