Pilot stir could hit Jet's fund-raising plan

Fund raising plans of private carrier Jet Airways may hit a roadblock because of the ongoing tussle between pilots and management over re-instatement of two senior pilots who were allegedly instrumental in forming National Aviators Guild (NAG), the 650 pilots strong union. Jet had previously on multiple occasions deferred plans to raise additional capital to the tune of $400 million, that was approved by the company's board due to volatile market conditions. The ongoing mass protests of pilots could also impact investor sentiments say financial planners. The carrier posted Rs 225 crore net loss for the quarter ended June 30, 2009 and has been in discussion with investment banks to raise funds by the end of the year. To add fuel to fire, the airline is also loosing out on market share which would disrupt its biggest fund-raising plan. Jet stock fell 3.54% on Thursday to close at Rs 253.25 on the Bombay Stock Exchange.

Meanwhile, despite facing a legal notice from Bombay High Court on contempt of court against Jet Airways pilots for halting work, the mass protest leading to a strike entered its third day on Thursday. NAG is likely to meet the labour commissioner on Friday to discuss the veracity of the issue.

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Jet Airways set to ground expat pilots

The country’s largest private carrier Jet Airways has plans to phase out most of its expatriate pilots and not fill other vacant positions in the coming months as part of cost cutting moves. Jet, which had posted Q3 losses of Rs 214 crore, had announced in September 2008 that it would undertake a slew of cost cutting measures to keep the company afloat in testing times.

The move to trim foreign pilots comes at a time when the airline, which recently had a strategic alliance with its archrival Kingfisher Airline, is in the process of rationalising routes on its domestic and international network.

According to sources, the airline had a board meeting on Monday where decision to trim foreign pilot headcount was taken. The airline has nearly 1,300 pilots of which 250 are expats.

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Jet Air proposes 5-10 percent salary cut

Efforts by Jet Airways chairman Naresh Goyal to keep the cash-strapped private carrier afloat amid a global recession suffered a setback when the company’s local pilots reportedly refused to accept the proposal of salary cut and suggested to do away with expatriate pilots.

In a meeting chaired by Goyal at a hotel here to discuss several issues related to the salary cut of the Jet Airways staff, the chairman of the private carrier asked his employees to accept a salary cut of up to 20%, said sources who attended the meeting.The sources said the domestic pilots did not accept the proposal of a salary cut and instead they wanted to remove the foreign pilots, who draw 40% more salary than their Indian counterparts.

Jet Airways has 700 domestic pilots and 200 expatriate pilots. The senior management staff of Jet Airways brought a proposal seeking a voluntary retirement scheme (VRS) for them, but Goyal reportedly told them he could not sanction it since the company was cash strapped, sources said.

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Flocking Together

AD times can make strange bedfellows of those who cannot see eye to eye otherwise. The Kingfisher-Jet alliance struck recently is an apt example. As the aviation industry in India bleeds and is estimated to close this financial year with cumulative losses of about Rs 8,000-9,000 crore (close to $2 billion) double the amount last year, alliances of this kind have become a necessity today.

“It (airline alliance) is nothing uncommon abroad,” says M Thiagarajan, managing director of Paramount Airways, a regional carrier that operates flights mainly in the south of India. “Alliances have been around for some time in the international market.”

Star Alliance, One world and SkyTeam, for instance, have been competing with each other globally over the last decade or so. The objective of these alliances is to provide a common pool of services to their members such as the use of common passenger terminals at airports, linking frequent flyer programmes and providing flights across member carriers.

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Airlines look to new revenue streams as fuel prices soar

In a bid to combat shrinking profits owing to rising fuel prices, airlines in India have started looking at newer revenue generating streams, as well as beefing up their business through new promotional activities. Air India is studying the cargo market in various countries to generate over 10% of its revenues from this new line of business. Go Air, too, is planning to enhance its cargo capacity.

Meanwhile, private carrier Jet has introduced special holiday packages for its passengers, while Kingfisher is in the process of designing a similar strategy. Cargo operations of Air India, at present, contribute 6% to the airline's revenues. The company is now studying the South East Asian market to ascertain the potential of cargo operations to that region, which normally has a high cargo offtake from India, especially in perishable goods. Says an aviation analyst with a Mumbai based broking firm, "Airlines looking at alternative revenue streams assumes significance since it comes at a time when jet fuel prices are getting steeper each day."

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Flying high in testing times

In the aviation industry, characterised by intense competition and high cost structures, streamlining every aspect of operations to bring in efficiencies is a high priority. Improving management's visibility to operational and business performance is imperative to achieve this. It was this objective that drove Jet Airways to conduct a business process reengineering exercise and reimplement core backend modules of SAP and extend its footprint simultaneously. Jet Airways caters to both domestic and international routes.

The main challenge lay in improving business visibility and reducing delays in MIS. Project E3 (it stands for efficiency, empowerment and effectiveness) was executed to deliver information regarding the performance of all routes/flights flown by the airline taking into account the revenues and various costs incurred to the top management. It works by intricately integrating critical information into data models from various core modules of SAP and an in-house developed module for cost and revenue accounting system.

Jet Airways has an in house applications module for revenue accounting system and costing developed using FoxPro, which was outside the SAP environment. Related reports or MIS had to be manually fed into the SAP systems, which was integrated with FICO and Business Warehouse (BW) to generate MIS reports. RN Moorthy, senior general manager (IT), Jet Airways says, "We had to cull out the data from our legacy applications, feed it into R/3 and do budgeting to produce MIS reports. There was a lot of time delay in reconciling the data from disparate systems and it was error prone as it required manual intervention." He adds, "The delay could be anywhere between a week to ten days after the closure of the week. Our people had to burn midnight oil to dig into the reports; it was taxing on our bottom line."

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