A DisKonnect with J Class
Naresh Goyal chews his pride and strips some of his full-service air planes of business class seats. Rivals can learn from his pragmatism
by Cuckoo Paul | Jul 20, 2009
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S ince May 8 this year, a curious new bird has been flying on Indian skies. Maverick businessman Naresh Goyal has sprung a surprise by launching a new low-fare flying service, Jet Airways Konnect, by taking away half the number of flights from his flagship brand, Jet Airways. And he has done something normally unthinkable — he has ripped out the business class and replaced it with economy class seats. Then, in a complete break with his business philosophy, he made Jet Konnect a low-cost carrier (LCC), setting prices that compete with the likes of SpiceJet and Indigo.
Why should Goyal, who has scant respect for the low-cost model despite running Jet Lite as an LCC, strip the airline of the lucrative J Class seats and then set up seats that fetch much lower returns? For instance, a passenger flying on Delhi-Mumbai, the busiest air-corridor in the country, pays about Rs. 20,000 for a business class ticket while the economy traveller pays only about Rs. 4,000. Of course, the fares are dynamic and the airlines keep coming up with new schemes and discount to nudge sales, but the differential between the classes is about 5:1. So whatever happened to Goyal’s belief in extracting premium fares from the high-fliers? The answer, in one word, is pragmatism. Given a choice, Goyal would not have opted for this new model. But since September last year, when the downturn had begun to wreck havoc on air travel, his hand has been forced gradually. More and more seats were flying empty. By January, things began to look really bad. Load factors, industry jargon for capacity utilisation, fell sharply from about 75 percent to 55 percent, well below the breakeven level of about 70-75 percent. While some pundits might have expected LCCs to suffer more in a downturn, reality turned out to be different. With a lower cost base and lower fares, LCCs have been able to face the downturn much more efficiently than the full-service airlines. “Passengers were saying that they weren’t prepared to pay for what Jet had on offer,” says Sudheer Raghavan, Jet’s chief commercial officer. “They were clearly looking for lower fare, no-frills service.” This reflected in the financial numbers. Jet’s losses touched Rs. 455 crore in the nine months ended December 2008. The writing on the wall was clear. Jet no longer had the option to sit out the storm. It has to come up with a plan to make the best of the bad times. Actually, ripping out the business class was not the first option that Goyal’s team tried. Since they already had a low cost brand JetLite, they initially tried a hybrid approach, using both airlines on some flights. That is, a passenger headed to city hub would be ferried by Jet while for the second leg of his travel (to a smaller place), he would have to board JetLite. The combined fare for the passenger would be lower. The plan obviously made sense, but somehow the dissonance was significant. “The hybrid experiment did not work. The cost did not come down sharply. And it ran the risk of cannabilising JetLite’s loyal customers,” recalls Raghavan. The LCC, bought out from Sahara India in 2007, is finally on a turnaround mode and has been turning in profits for the past two months, he says. |
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Find this article in Forbes India Magazine of 31 July, 2009
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Recent Comments
SuperFlyBoy :
September 25, 2009
Hi Lubna, There are a *lot* of Jet Airways elites (frequent fliers) who feel the same way as you do - I am one of them. There has been a steady move to JetKonnect anything that moves, apparently, and we (loyal Jet fliers) will end up with no full-fare service domestically in India, due to "catering to the masses". You might wish to check out the Airlines of India forum on FlyerTalk, where a lot of the banter regarding this is taking place. One thread is: http://www.flyertalk.com/forum/airlines-india/954974-jet-konnect.html I seriously fail to understand why Jet is trying to behave as a LCC - because they should be doing this system-wide and not just for their domestic passengers!
September 25, 2009
Hi Lubna, There are a *lot* of Jet Airways elites (frequent fliers) who feel the same way as you do - I am one of them. There has been a steady move to JetKonnect anything that moves, apparently, and we (loyal Jet fliers) will end up with no full-fare service domestically in India, due to "catering to the masses". You might wish to check out the Airlines of India forum on FlyerTalk, where a lot of the banter regarding this is taking place. One thread is: http://www.flyertalk.com/forum/airlines-india/954974-jet-konnect.html I seriously fail to understand why Jet is trying to behave as a LCC - because they should be doing this system-wide and not just for their domestic passengers!
Lubna :
July 23, 2009
This move may help Jet airways, it certainly hasn't helped its customers, at least I am having second thoughts of flying Jet.
I have always been loyal to Jet airways, since it was launched and have not flown any other airline, but these days I find them slipping badly on two counts:
1) Flights get clubbed. You are not given the choice of a later flight, but forced to hurry through meetings and catch an earlier flight. And you are informed of it (at least you are informed about it) a few hours before the flight. What if you are in a meeting and cant' take an anonymous call from the Jet call centre????
2) Only on reaching the airport do you suddenly find that you are not flying Jet but Jet Konnect. This after trying to find out what on earth happened to your flight!
I hate the fact, that Bangalore is singled out as a non-metro city where the Jet Konnect plan has now been put into action. Perhaps it is going to be bye-bye Jet for me, for now.
I agree with the views of Perry Flint, all that Jet may find is loss of its frequent flier passengers!
July 23, 2009
This move may help Jet airways, it certainly hasn't helped its customers, at least I am having second thoughts of flying Jet.
I have always been loyal to Jet airways, since it was launched and have not flown any other airline, but these days I find them slipping badly on two counts:
1) Flights get clubbed. You are not given the choice of a later flight, but forced to hurry through meetings and catch an earlier flight. And you are informed of it (at least you are informed about it) a few hours before the flight. What if you are in a meeting and cant' take an anonymous call from the Jet call centre????
2) Only on reaching the airport do you suddenly find that you are not flying Jet but Jet Konnect. This after trying to find out what on earth happened to your flight!
I hate the fact, that Bangalore is singled out as a non-metro city where the Jet Konnect plan has now been put into action. Perhaps it is going to be bye-bye Jet for me, for now.
I agree with the views of Perry Flint, all that Jet may find is loss of its frequent flier passengers!
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