Hyderabad. The code-sharing and operational alliance between Jet Airways and Kingfisher Airlines were needed to avoid bankruptcy and ensure profitability, said the chiefs of the two airlines Wednesday at the end of a chief executives’ conclave here at the India Aviation 2008 air show.
“Code-sharing and route rationalisation were needed by both of us to avoid bankruptcy,” Jet Airways chairman Naresh Goyal told reporters after an open house interactive session between Civil Aviation Minister Praful Patel and more than 35 CEOs from the aviation industry.
According to Goyal, the Indian air traffic sector is now burdened with around 30-40 percent excess capacity, and all airlines were bleeding. “There is no Chapter 11 bankruptcy in this country, so what do you do,” he said, referring to a bankruptcy code in the US that allows reorganisation under that country’s bankruptcy laws.
“The industry seat factor now is 60-65 percent while break-even is at 90 percent,” he said explaining why the two airlines were losing nearly Rs.150-200 million a day.
“This kind of alliance was inevitable and happens in every other industry,” Goyal said. “This has happened in Europe and elsewhere but happening the first time in the Indian airlines space.”
Added Kingfisher chief Vijay Mallya: “We have set up a group to examine the route rationalisation issue because it does not make sense that both of us operate the same route with low seat factors when we can rationalise so that a route is serviced at a high rate of capacity use.”
Denying that Jet had laid off employees or were going to do that, Goyal said: “The people laid off were probationary employees and there will be no retrenchment of permanent employees.”
“Our employees are our family and we will take care of all of them… if our people our not there then there will be no company either,” he said.
Both Mallya and Goyal hinted that the airline industry was seeking some kind of regulatory body to ensure healthy competition while avoiding excess capacity.
“International airlines are dumping capacity, dumping prices and there is no regulation,” said Goyal.
© India Strategic