India?s largest passenger carrier by market share, Jet Airways has said that high taxes on aviation turbine fuel and high airport charges will ?stifle? demand for air travel.
?The authorities need to recognise that these additional costs, if passed on to passengers, will only dampen or stifle demand as airlines themselves can?t absorb any of these further costs due to their fragile financial conditions,? said the airline?s chairman, Naresh Goyal, in a letter to the shareholders as part of the company?s annual report for 2011-12.
The three listed private airlines ? Jet Airways, Kingfisher Airlines and SpiceJet ? made a loss of R4,169.88 crore in fiscal 2011-12, while national carrier Air India is estimated to have made a loss of R7,853 crore for the fiscal, even as the number of air passengers grew nearly 17%.
However, fuel costs for the airlines rose anywhere between 40% to 50% during the fiscal, which eroded their profitability as they dropped fares to overcome competition. Airlines have had to face more pressure in terms of operating costs as, earlier this year, the Delhi International Airport raised tariffs three-fold for the next two years.
The increase was passed onto passengers by the airlines and it has already impacted air travel. According to statistics of the Directorate General of Civil Aviation, there was a 0.87% drop in the number of air passengers for May at only 54.48 lakh.
Jet Airways is navigating the turbulent skies by undertaking strict fiscal control measures, said Goyal.
?We have looked at several non-payroll areas to minimise costs,? he said. ?These included contract re-negotiations, process improvements, increasing ancillary revenues, discontinuing loss-making routes, restructuring agent commissions and sale and leaseback of some of the aircraft to repay dues.?
?These measures will help your airline over the medium-to-long-term. It is this fiscal prudence, coupled with some truly unique marketing initiatives such as increased customer touch points through social media tools and a strategic rebranding exercise that has helped your airline to keep flying through stormy skies,? he added.
The airline has been trying to reduce its costs by minimising travel agent commissions.
The annual report states that the airline is improving its website to increase sales via the medium and also going to launch mobile platforms on BlackBerry, Android and iPhone to increase ticket sales via the mobile platform, taking away the need for agent commissions.
Jet has also re-deployed a lot of its fleet on the profitable Gulf routes. It now operates 44 daily flights to the region from India.
Goyal also said that reduction in seat capacity by the airline industry will bode well. ?The on going capacity reduction in the industry will help align demand with the capacity and help airlines rationalize fares and strengthen yields,? Goyal said in his letter. ?The impact of this, however, would only be realised in the financial year 2012-13.?
