Jet Konnect: A flexible solution
This country is huge and can have multiple market segments. We have our full-service Jet Airways, and we have JetLite. There is a segment in between where, if the market ceases to exist, we can convert it back to full service. We are punting on Jet Konnect.
SUDHEER RAGHAVAN, CCO, JET KONNECT
The need for a “rapidly deployable and flexible solution” saw Jet Airways launch, Jet Konnect, its new low-cost sub-brand in May this year. In an interaction with Business Line, the airline’s Chief Commercial Officer, Mr Sudheer Raghavan, outlined the reasons for launching a new airline, rather than transforming JetLite (former Air Sahara), the current low-cost airline of the Jet Group.
Excerpts from the interview:
Why did the Jet Airways management decide to launch another sub-brand, Jet Konnect?
In the current situation we required a solution and a rapidly deployable and flexible solution. There are a number of reasons for this. In our dealing with corporate houses it was abundantly clear that the decision taken some time ago to cut back on air travel was not going to change very rapidly.
Many people talk about green shoots and the economy turning but there are no fundamentals to indicate that there is light at the end of the tunnel. There was a significant shift on those routes that we converted to Konnect; we saw our numbers were falling faster than the actual market drop on those routes which indicated that the airlines offering lower fares were getting market share.
At that time we decided that our market did not grow but our passenger loads were higher than the market growth. If you take a long-term view this is a transient phenomenon. What we are experiencing today is an interim phenomenon. When the market turns around, there will be room. My belief is that there will be a market that will ask for a full-service carrier and there will be a market that will ask for nothing but the lowest price.
I suspect there will also be a market somewhere in between, that will say price is important but I also want on-time departure and quality services, though I do not need frills like food, etc. There will be a segment of the market that will look for value. It will be prepared to pay marginally more than the low fare but not as high as full service.
I see the development of distinct models — the ultra low, where some of the low-cost carriers will play, and the value arena where some low-fare variants of full-service airlines will play. This country is huge and can have multiple market segments. We have our full-service (Jet Airways), we also have JetLite.
There is a segment in between, where we needed to be present. We are punting on Jet Konnect. We needed to have a solution where, if we believe the market does not exist, eventually we should be able to convert it back to Jet Airways. So, all we are doing is using the same crew and the same aircraft. We are just converting it into a single-class configuration with buy-on-board meals.
The change of two classes into a single class must be costing money?
Actually, not really. We had some seats that are required to convert an aircraft from a twin-class cabin to a single-class cabin. We have not spent money on the number of aircraft that have been converted today. We had enough seats in our inventory to take out the business class seats and convert the aircraft into ‘all-economy’. So we went ahead and did that.
To convert more aircraft than we have, we will have to buy more seats. We are buying ship-sets. If we buy one ship-set we can convert three more aircraft. We will probably buy a few ship-sets, this does not cost us huge amounts of money. But we will not throw away the business-class seats. If we do not see a future, we can convert back. That is why we say it is a flexible and rapid solution. We already have the pilots and cabin crew. In fact, we have reduced the number of crew on Jet Konnect as it is a buy-on-board concept. We now have four crew members on Jet Konnect, while traditionally we have six crew members. We are earmarking about 20-30 more flights for Konnect.
There will be two aircraft in August and the rest will be when we get the seats shipped in. We have placed the orders. By the northern winter schedule, which starts in October, we should have all the flights we want to convert to Konnect connected. It is not a small initiative. We are switching a sizable percentage of our domestic operations to Konnect.
We are not averse to launching Konnect services even on our international routes. Where the market so requires, we will switch. We are evaluating a few routes, all of which will start within this year. Our reading is that this economy will take some time to mend and, as long as these conditions prevail this solution should help us.
What have been the results so far?
On the routes we have converted to Konnect we have seen a significant climb in the seat factor. Where it used to hover around 50 plus per cent it has shot up to about 74 per cent. Despite the conversion there are some bummer flights, which are less than the fingers on one hand. The way we measure (how a flight is doing) is by seeing what the flight was carrying on average about eight weeks earlier and what it is carrying now, after it has been converted. This growth has, however, come at a yield decline of 12-15 per cent. So, if you do the math it is in the right zone. We get more on the top-line, with no increase in costs, in fact a decrease in costs because there is no food served and the reduction in the number of crew members.
How many seats have been added due to the conversion?
Our goal is to have 175 seats. We are currently averaging 168.
Why did you introduce a third name?
The real reason why we did not expand JetLite into this route is because its fleet is fully utilised. It was possible to transfer some aircraft from Jet Airways to JetLite, but there were impediments. These were not insurmountable but there would have been time-consuming hurdles. Jet Airways and JetLite operate under different Air Operators Certificates (AOCs). The lessors of the aircraft are different. We would also need to get local DGCA approval to transfer assets. Besides, JetLite does not have enough crew to operate these additional services. And there are tax issues.
Has Jet Airways got out of any of the routes on which Konnect operates?
All the Konnect routes were previously operated by Jet Airways. So, when we convert, we do not operate another Jet Airways flight. We also try and ensure that JetLite flights do not overlap with Konnect flights.
Does it help maintain a better fare level?
There is some influence. But, then again, in all the flights that we converted to Konnect, there was hardly any JetLite presence. So we do not have to benchmark against the JetLite fares. We are priced marginally higher than the low-cost carriers. But the wild card in this is the price of oil.
Jet plans to transfer more flights to Konnect
Jet Konnect plans international flights