Airlines need to cut fleet, more jobs to stay airborne

Airlines need to cut fleet, more jobs to stay airborne

SURAJEET DAS GUPTA, MANISHA SINGHAL & ANIRBAN CHOWDHURY New Delhi/Mumbai, 20 October Jet Airways' aborted plan to cut 1,900 staff partially reflected the crisis in the aviation industry. Analysis by Business Standard shows that Indian carriers will need to cut their domestic fleet and manpower by a fifth in the next few months to fully align themselves with the slowdown in passenger growth. Domestic carriers, which include Jet Airways, Kingfisher Airlines, Air India (for aircraft that fly domestic routes) and the low-cost carriers, have a combined fleet of over 300 aircraft. Some 60 aircraft will have to be withdrawn from this fleet if airlines hope to increase the passenger load factor (PLF) — a measure of capacity utilisation in aircraft — to around 80 per cent, which is required to break even. The average PLF over the last few months has been 50 per cent. According to the Centre for Asia Pacific Aviation, in the opening busyseason month of October, the average PLF was 60 to 65 per cent, at least 10 per cent less than last years numbers. A decrease in capacity by 20 per cent on key routes assuming air fares and demand are constant would lead to PLF rising 20 per cent. Airlines have already cut passenger capacity by 10 to 15 per cent according to aircraft manufacturer Boeing in the last few months but that, of course, is not enough. The carriers also need to cut manpower by around 12,000 people out of the 60,000 employees working in domestic aviation if they are to stop making losses. The number is based on the fact that the average employeeto-aircraft ratio in India is1: 200 (this number might be slightly skewed because stateowned Air India's ratio is 1: 300). In fact, analysts said, the job cuts need to be higher if the airlines want to achieve global aviation standards of 150 employees per aircraft. "The cut has to come from full-service carriers because low-cost carriers have only 100-odd surplus employees," said a senior executive with alow-cost carrier. Considering the strong opposition from political parties of all hues to Jet's plans to lay off unconfirmed cabin crew, carriers are, however, unlikely to push through such amajor cutback. Domestic air traffic continues to decline BS REPORTER New Delhi, 20 October The Indian aviation industry continues to witness a slump with domestic air traffic in September decreasing by almost 20 per cent compared with the same month in the previous year. In August, traffic had decreased by 16 per cent, as against that in the same month a year ago. Traffic for the July-September quarter saw a decrease of around 17 per cent compared with the same quarter last year. Industry experts said that apart from the excess capacity in the industry, the slowdown in demand even in the peak season was a result of the recent fare hikes of 10-15 per cent which was announced by several full service carriers. Experts added that there was an excess capacity of 20 per cent or around 60 aircraft, which needs to be taken out before there is a match between demand and supply. As a result, more than 300 domestic flights will have to go out of operations. "Airlines have already cut down capacity by 25-30 per cent starting from June. They need to cut down another 20 per cent," said an industry expert. The rationalisation in capacity has helped Kingfisher Red, formerly Simplifly Deccan. Kingfisher Red's loads shot to more than 51 per cent, around 32 percentage points up from AUGUST 2008 SEPTEMBER 2008 Airline Marketshare Load Marketshare Load Indian 18.0 56.2 18.1 53.3 Jet Airways 24.2 68.3 23.6 64.0 JetLite 9.3 63 8.9 58.8 Deccan 10.2 39 12.3 51.7 Kingfisher 14.8 59 15.3 56.7 SpiceJet 8.5 56.8 8.0 50.5 Paramount 1.7 69 1.7 62.0 GoAir 2.7 70 1.8 57.0 IndiGo 10.3 62 10.1 56.0 September 2008: 2.6 million passengers September 2007: 3.3 million passengers July-Sept quarter 2008: 8.6 million passengers July-Sept quarter 2007: 10.2 million passengers the last month. It has been able to capture 12.3 per cent share of the domestic market, up from its August marketshare of 10.2 per cent. IndiGo, which had surpassed Kingfisher Red by capturing 10.3 per cent of the market share in August, slipped to 10.1 per cent in September. "After turning to Kingfisher Red, which is just an extension of Kingfisher Airlines, we cut off a lot of excess flab in terms of flights. This has resulted in the higher loads," said a Kingfisher executive. Apart from Kingfisher Red, every other airline has seen a fall in loads in September compared with the previous month.