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Malcolm

Jetairways on the Ropes?

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one reason given is the loss of market to Indigo, a low cost carrier.

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EW DELHI: Jet AirwaysNSE -6.90 % has informed its employees that the airline will not be able to operate beyond 60 days unless cost cutting measures, which include pay cuts, are put in place, two executives confirmed to ET. 

The management team, including its chairman Naresh Goyal, informed employees in face-to-face meetings in recent days in Mumbai and Delhi that the airline’s financials are in a bad shape and drastic measures needed to be taken to cut costs. 

The warnings of lo .. 

 

Read more at:
//economictimes.indiatimes.com/articleshow/65251532.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

 

 

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So clever.  Best way for airlines to save money. Cut the pilot’s pay. And then they spend a decade or so getting it back. 

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The following story is all about India and the low fares / higher cost / increased number of passengers, but if you replace the rupee with the Canadian dollar along with names of some of our carriers, the story would likely be accurate for Canada (except of course the number of domestic passengers).

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India's airlines have more customers than ever but profits are hard to find

by Rishi Iyengar   @Iyengarish August 3, 2018: 12:29 PM ET
 
 

India's airlines are struggling to turn a profit on a boom in passenger numbers.

Shares in Jet Airways, one of the country's biggest carriers, plunged 7% in Mumbai on Friday following media reports that the company barely has enough money to make it through the next two months.

The stock has lost more than 60% of its value since the start of this year, even as it spends billions to try and compete in the world's fastest-growing aviation market.

In a statement sent to CNNMoney, Jet Airways CEO Vinay Dube slammed the media reports as "incorrect" and "malicious." Dube said the airline was implementing measures to boost revenues and cut costs, and that the company was in talks with its employees.

"Some of these [efficiencies] amongst others include sales and distribution, payroll, maintenance and fleet simplification," he added.

India's Economic Times reported that employees were being asked to take pay cuts of up to 25%.

Related: This Indian airport will fly you to the terminal for $65

More than 68 million passengers flew within India in the first six months of 2018, according to official data, a 22% increase from the same period last year.

The latest available figures from the International Air Transport Association show that India's domestic passenger traffic grew by nearly 17% in the month of May compared to the same month last year. China's grew by almost 12% in the same period, while the United States showed growth of 5.5%.

 

Millions more Indians are flying

 

The Indian aviation sector has now enjoyed double-digit percentage growth for 45 straight months.

Jet Airways has responded to that spike by going on a spending spree to boost its fleet.

It plans to add 225 new Boeing (BA) 737 Max jets over the next decade, of which 75 — worth nearly $9 billion at list prices — were purchased less than three weeks ago.

Jet Airways stock has dropped more than 60% so far this year.

 

But with several airlines competing to offer Indians cheaper ways to travel, the constant pressure on fares has made it difficult to make money. A surge in oil prices, combined with a plunge in India's currency — the rupee — is squeezing finances across the industry.

"On one side your costs are going up significantly, on the other side your ability to pass on those costs is limited," said Kapil Kaul, India CEO for the Center for Asia Pacific Aviation.

"The Indian market, despite having growth, has been mostly profitless," Kaul added.

 

Costs are rising, fares not so much

 

Dube, the Jet Airways CEO, underscored those challenges on Friday.

"The aviation industry is currently passing through a tough phase given a depreciating rupee and the mismatch between high fuel prices and low fares," he said, adding that the airline has come through similar storms in the past.

Jet Airways isn't the only Indian carrier that's under pressure.

Profit at market leader IndiGo fell 97% in the quarter ended June, compared to the same period last year. CEO Rahul Bhatia also blamed the falling rupee and rising fuel costs.

India is also having to prop up its loss-making national carrier.

Since failing to sell a 76% stake in Air India to private investors earlier this year, the government has been forced to pour hundreds of millions of taxpayer dollars into the airline to keep it flying

 

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Fuel prices under control at Delta. I’m surprised other airline execs haven’t noticed the advantages. 

https://www.google.ca/amp/s/www.fool.com/amp/investing/2017/09/03/delta-air-lines-refinery-bet-is-about-to-pay-off-a.aspx

Edited by blues deville

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NEW DELHI: The news of Jet AirwaysNSE -0.34 % telling its employees to take salaries cuts has sent shock waves in the sector. Most airlines are battling challenges on the profitability front but the salary cuts at Jet have highlighted the problem starkly. Jet has informed its employees that the airline would not be able to operate beyond 60 days unless cost-cutting measures, which include pay cuts, are put in place, according to ET report that cited sources. What actually happened 
Jet Airways has informed its employees that they would have to take an up to 25% cut in their salaries as cost of operations for airlines is increasing on the back of rising crude and a falling rupee. Salary cuts are in the range of 5% (for those earning Rs 12 lakh annually) to 25% (for those earning Rs 1 crore and above) starting this month. Jet said senior management had already taken pay cuts. 

This decision hasn’t gone down well with the pilots .. who have not agreed to a pay cut in a market that is struggling with a huge deficit of pilots, especially commanders. In a similar move last year, the airline had reduced the salaries and other benefits of about 350 junior pilots by about 30% from August. 

Why the pay cuts 
The airline says pay cuts are part of its cost-cutting exercise. “As part of its cost rationalisation measures, the airline continues to evaluate all initiatives to achieve greater business efficiences .Payroll is one of the important components of cost structure and the senior leadership has undertaken a reduction in salary to lead by example,” the airline told ET. 

In a statement, the airline said it was focusing on creating a healthier and more resilient business and that it had been implementing several measures to cut costs and raise revenue margins. The airline has also said that that it was committed to sustainable growth and was planning to add 225 B737 MAX aircraft. At least  At least 11 of these aircraft would be inducted this year, it said. Jet has refuted "speculative comments from certain vested interests", terming them "deliberate attempts to undermine Jet Airways’ transformation efforts". 

Profitability challenges 
After two consecutive years of profits in fiscal 2016 and 2017, Jet incurred losses of about Rs 76 crore during FY2018. Industry analysts say it is likely to report a loss of Rs 1,000 crore in the first quarter of the current fiscal. Jet is not the only carrier that has witnessed a decline in profitability. IndiGoNSE 7.03 %, 

India’s largest carrier by passengers flown, has reported a 91% drop in profits for the first quarter of this fiscal. The bottom line of airlines is getting hit due to high cost but lower yields in India, which is the largest growing market in terms of passenger growth on the globe. Analysts say fall in yields is due to airlines not being able to charge a premium on fares booked at the last minute. 
 

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