Even low-cost carriers find it
hard to operate profitably, as
the customers hit hard by the global economic slowdown shun
air travel and prefer other cheaper modes of travel, while business
travelers are downgrading literally by traveling economy class or
avoiding travel at all, as companies advise staff to cut costs, including
travel costs. At the same time, airlines are struggling hard with their
mounting operational costs. The large or full-service carriers are the worst
hit. While Jet Airways, the largest domestic carrier by market share,
recorded a loss of Rs 214.18 cr in the third quarter of 2008, an increase
of Rs 123.06 cr from last year's Rs 91.12 cr loss, the second largest
airline, Kingfisher Airlines, recorded an even bigger loss of Rs 626 cr on
December 31, 2008, as against the loss of Rs 423 cr in the same quarter of
previous year, an increase of 48% on year-on-year basis. To cut costs and boost
revenues, the major carriers have also resorted to raising airfares,
despite the fact that jet fuel tax was cut for the
11th time in February since the government began cutting ATF
(Air Turbine Fuel) taxes since September 2008. "The kind of fares seen in
January (2009) would have required each airline to have a load factor of
over 100% for break-even," said Deepa Dey of SpiceJet, a low-cost
airline. Besides, taking a cue from Jet layoff fiasco of last year, airlines are
now renegotiating wage cuts with their pilots and engineers. For instance,
in February, major carriers raised fares by almost 40-50% as they felt
that low-cost fares could not boost demand. Some airlines are even
exploring the option of some kind of tie-ups to rein in operational costs. For
instance, Jet Airways and Kingfisher Airlines in October last announced
of their alliance in the area of fuel management, code-sharing, ground
handling, and sharing of technical
resources to rein in costs and boost revenue.
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