Full service airline, Jet Airways, has been feeling the cash crunch over the past few months. Now, it appears the Mumbai based carrier is taking drastic measures to reduce its outgoings, including grounding several of its widebody fleet and encouraging staff to take unpaid leave.
The airline apparently has more than 4,000 cabin crew currently in ‘excess of requirements’. Jet Airways have claimed that the leave without pay arrangement is an ‘employee friendly’ initiative, and nothing to do with cost savings at all.
In addition to this, four widebody jets have been parked up for several weeks now. One, an A300-300, is in Jordan apparently having an engine replaced. But the other three are somewhat more mysterious.
Why are these Jet Airways planes grounded?
Of the three Jet Airways planes grounded, there is no clear indication of why they’re not in the skies. Specifically, they are:
- VT-JEX: A Boeing 777-300ER which has been parked at Chennai since September 29th
- VT-JWS: An Airbus A330-300 which has been parked at Chennai since October 2nd
- VT-JWQ: An Airbus A330-200 which has been parked at Mumbai since October 5th
And then there is also VT-JWR which is an Airbus A330-300 and is at Amman for ‘heavy maintenance’.
Interestingly, all of the grounded Airbus craft are on lease, so Jet Airways are apparently paying leasing costs while making no money at all from the planes. The routes previously serviced by the A330s have been replaced by mainly Boeing 737s with some routes using 77Ws and A332s.
What about the Jet Airways unpaid leave offer?
Jet maintain that their unpaid leave agreement is to do with work-life balance and staff requiring time off over the holiday season. However, judging by recent situations, we firmly believe this is a cost reduction measure from a failing airline.
Back in September, the airline was unable to pay the salaries of many of its staff. Even now, no confirmed deadline has been agreed for the payment of outstanding money, although last week they were able to make a 50% payment to pilots, engineers and senior management.
According to staff, the airline has been defaulting on salaries for some time, either making partial payments or in some cases not paying at all.
Initially, the airline offered cabin crew working on their Boeing 737’s up to 15 days unpaid leave, to be taken in October. However, this has now been extended to the crew of Airbus A330s and Boeing 777s in November and December for up to 50 days.
Although Jet Airways are adamant that they are doing this to be more ‘employee friendly’, analysts beg to differ. Numerous financial gurus have spoken out, claiming that taking cabin crew out of service for two months could reduce overheads by 16 – 17%. That’s a huge cost saving for the airline, at a time when they clearly are struggling to make ends meet.
What’s the problem at Jet Airways?
For some time now, Jet Airways have been struggling with their finances. High fuel costs and the continuous depreciation of the rupee have led to record losses in the first two quarters of the year. In these periods, the carrier posted losses of Rs 1,036 crore and Rs 1,300 crore; that’s around $141m and $177m respectively.
As far back as early August, Simple Flying reported that Jet Airways could be about to crash and burn. We gave them 60 days to turn things around after they tried to cut staff salaries by 25%. At the time, Jet claimed this was not a cost saving measure either; rather it was a ‘restructuring’ in order to accommodate a new business model.
Despite ordering $8bn worth of new 737’s, Jet have repeatedly put the brakes on the delivery of these assets. In fact, in a surprise move by Boeing, the manufacturer stepped in to help the struggling carrier, reportedly returning progress payments and deposits in an effort to keep Jet Airways afloat.
Since then, part owner Etihad have stumped up around $35m to help the struggling airline. This was through pre purchase of air miles under the Jet Privilege scheme, and again Jet Airways assured the world that this was nothing out of the ordinary.
Far be it from us to condemn an airline to failure, but despite Jet’s reassurances of everything being ‘business as usual’, we’re seriously concerned for their future.