Sunday, 24 June 2012

‘Profitability is the only route to survival for airlines’


On the sidelines of the recently concluded 68 {+t} {+h} annual general meeting of the International Air Transport Association in Beijing, Mr Sudheer Raghavan, Chief Commercial Officer, Jet Airways, spoke on a host of issues with Business Line.
Excerpts from the interview:
Why have fares gone up?
We have been asking ourselves this question. Fares went up in late April, May and are holding there.
I think there is realisation among carriers operating full schedules that what happened in the past is unsustainable. You saw Spice announce its results and it was not a pretty picture. With a very small international footprint it announced a loss which was not too far from ours.
There is a general appetite for airlines to go down the route of profitability as opposed to chasing market share because market share does not walk to the bank.
There is no appetite among the banks to lend money. So at the end of the day the only route to survival is through profitability. This realisation, though late, has dawned on most carriers. There is an attempt that every one adopt a responsible attitude on pricing.
Have we raised fares since Kingfisher went down? The only way to satisfy yourself is to look at the range of fares that were supplied to DGCA (Director General of Civil Aviation) last year and the range supplied this year; it has not changed.
What has changed probably is that there are less fare buckets.One airline has shrunk capacity, so even if demand stays the same passengers have to find seats from existing carriers at a higher bucket level.
That has happened. And that has helped increase yields. So fares have gone up vis-à-vis last year but not by 25-30 per cent.
Are you looking at another hub in Europe?
As a carrier that is growing we have to ask the Government to fly to various places. One was Munich. We also asked for a few other places.
Does that signal our immediate desire to shift the hub? Shifting a hub is not like changing shirts. It is a massive enterprise. And we have to do it sensitively as there is a lot at stake. If we want to shift a hub it has to be preceded by a whole host of studies. Asking for traffic rights to fly to a place does not signal a desire to change a hub.
In Brussels we can do smooth seamless transfers. For us to move a hub we have to find some place that allows all this. Name me a place where you can take six wide-body aircraft at the same time and park them next to each other so that passengers can transfer?
So it is off the radar as of now.
Yes. We are asking ourselves why would we want to move our hub. It will be a disruption for the passengers who are used to it. There must be significant gains if we move a hub.
But at the same time we need to fly to more places in Europe because there is a strong demand within Europe and India. Any growing airline needs to grow its network.
If we aspire to be a strong global carrier with Indian roots, can we be satisfied by flying just to London and Milan? We have to go to all the major financial and economic centres of gravity of the world.
But given the slowdown, does that make sense?
When you grow depends on economic cycles. In the last two or three downturns the recovery has been V-shaped.
In the last two downturns everything plunged but picked up fast. For an airline we need to recognise these trends and plan ahead.
What kind of international versus domestic revenue are you looking at?
Currently it is 58 to 42. My view is that future growth is still in domestic. We will not say let us shrink our domestic operations and put these assets in the international market.
No doubt despite the high growth rate in the Indian domestic market very few people are profitable, but it is still the market with one of the highest growth potentials in the world. Under no circumstances will we ignore our domestic operations as that is our roots.
India feeds a lot of global aviation. But it is not Indian carriers who do so.
I can go and grow internationally but our distinct advantage as Indian carriers is to carry Indian passengers from every corner of the country on to our international footprint. The opportunity to grow internationally will always be there.
Airport costs are also going up?
We work at cross purposes. We have a great geographical location and in no way are we inferior to, say, Singapore. India and Dubai have almost identical positions.
So if you have an Inc strategy then $17 billion worth of traffic flew from west to east India and vice versa in 2010. Guess how much Indian carriers got despite the Government being able to negotiate for the country’s incredible wealth of traffic rights? Less than 1 per cent.
We want to become a global aviation hub. For that we need strong Indian carriers who are able to use the traffic rights that the Government has secured.
We need to have airports that take a long-term perspective and work with airline partners to bring passengers from various parts or through hub airports and take them on. The reason Dubai and Singapore are successful is because there is a national agenda to make them global aviation hubs.
How will India Inc do this?
This cannot be done by an airline alone. There must be an India Inc agenda and it has to be driven by the Government.
ashphadnis@thehindu.co.in

The reason Dubai and Singapore are successful is because there is a national agenda to make them global aviation hubs. SUDHEER RAGHAVAN, CHIEF COMMERCIAL OFFICER, JET AIRWAYS

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