Etihad-Jet Affirm Plans for Growth, Profits

 - July 24, 2014, 11:12 AM
Etihad CEO James Hogan (right) and Jet Airways chairman Naresh Goyal meet in New Delhi. (Photo: Neelam Mathews)

India’s loss-making Jet Airways and its new 24-percent owner Etihad Airways are formulating plans for restructuring debt and fleet rationalization for enhancing a full-service branding. Jet, reporting $689 million in declared losses last year, expects to show profits by 2017, founder and chairman Naresh Goyal said at a July 23 press conference in New Delhi.

A slowed economy, infrastructure constraints, and rupee depreciation have in the past years resulted in massive losses for airlines in India. Nevertheless, Etihad Airways president and CEO James Hogan ruled out any exit strategy. “This is not an overnight turnaround,” he said. “It’s a structured rebuilding process…We have a responsibility to shareholders of the company…for return to sustainable profitability.” Meanwhile, competition continues to grow ever more fierce. For example, AirAsia India recently started operations and Tata-SIA plans to launch services in October. Six airlines in total recently have obtained No Objection Certificates.

“It’s been tough over recent years. Our international operations are already profitable and contribute 45 percent to our total revenue,” said Jet Airways CEO-designate Cramer Ball, former CEO of Air Seychelles, an airline in which Etihad owns a 40-percent stake. Jet Airways is expanding fast to international destinations through code-sharing pacts and services to Ho Chi Minh City starting in November and to Kuala Lumpur, Yangon, and the Seychelles by March 2015. The company has signed a code-share deal with Alitalia, in which Etihad will soon acquire a 49-percent stake, potentially creating an unconventional fourth major global alliance. “You could say that,” Hogan told AIN, “we already have network strength.”

Etihad and Jet have begun to realize cost savings and synergies in areas such as fleet acquisition, maintenance and training, said Hogan. The “alliance” will continue to explore collaborative purchasing opportunities for fuel, spare parts, insurance and technology support, he added.

With plans for growth of its full-service brand set, Jet Airways has entrusted hybrid low-fare/regional affiliate JetKonnect “with bankers for restructuring,” said Goyal. Jet Airways has already started the process of transferring 18 ATR 72-500s and -600s to JetKonnect, an official told AIN. He added Jet Airways pilots have asked for assurance that a common seniority list remains.

Abu Dhabi-based Etihad Airways, which celebrates the 10th anniversary of its inaugural flight to India in September, currently operates 112 weekly services to 10 Indian destinations. During the first quarter of this year, more than 621,000 people traveled on the airline’s India services, representing a growth rate of 51 percent year-on-year, according to Sydney-based consultancy Center for Asia-Pacific Aviation.