Jet set to prune operations, shed heads to stay airborne

Naresh Goyal-led Jet Airways is expected to take several harsh steps in the coming weeks to cut costs.

To begin with, the country’s largest private airline group is likely to shut down two of its six operation bases — in Hyderabad and Bangalore (where it does night landing of aircraft) — and use Chennai instead as the southern operations base.

Next, it could lay off contractual workers who are over 60 years. Junior employees, being supplied by outsourcing agencies, may also be given the pink slip.

These decisions have already been conveyed to the top and middle management of the airline and are expected to be implemented soon.

The airline is scheduled to announce second quarter results today. Analysts have already estimated recurring losses to be as high as Rs.250 crore for Jet Airways and Rs.100 crore for its low-cost arm, JetLite. This is almost double the loss posted in each of the two preceding quarters.

Rising fuel costs — fuel prices are up over 40% — have been only partially offset by a 10% rise in overall yields, forcing most airlines to adopt harsh measures to pare costs in the last few months.
Meanwhile, the Jet management has apparently assured permanent employees that their jobs are safe and that only temporary/contractual workers will be axed. The overall reduction in manpower could well add up to 10%.

About a dozen employees in Bangalore, who were looking after the work at the operational base are being relocated.
Three people in Hyderabad are also being shifted out.

In Delhi, the airline earlier had 28 employees looking after operations. Of these, three have already left, effectively bringing down the staff strength by over 10%.

Jet Airways did not reply to a detailed questionnaire on these measures. A spokesperson merely said, “Jet Airways would like to clarify that in view of spiraling operational costs and increase in fuel prices it is continually looking at several non-payroll areas at cutting costs. Jet Airways seeks to bring down costs further by adopting possible measures, but without bringing down its workforce.”

Jet, like Kingfisher, is suffering due to predatory pricing by other airlines and low-cost frontrunners like IndiGo. Increasing debt burden and a steady rise in fuel prices have eroded margins further.

The airline is also burdened by its low-cost arm, which accounts for 12-13% of the group revenues but for 40% of its recurring losses.