Naresh Goyal chews his pride and strips some of his full-service air planes of business class seats. Rivals can learn from his pragmatism
Since May 8 this year, a curious new bird has been flying on Indian skies. Maverick businessman Naresh Goyal has sprung a surprise by launching a new low-fare flying service, Jet Airways Konnect, by taking away half the number of flights from his flagship brand, Jet Airways. And he has done something normally unthinkable — he has ripped out the business class and replaced it with economy class seats. Then, in a complete break with his business philosophy, he made Jet Konnect a low-cost carrier (LCC), setting prices that compete with the likes of SpiceJet and Indigo.
Two months ago it didn’t exist, but today, Jet Konnect is becoming an important part of Jet’s strategy to ride out the slowdown in air travel, and could soon begin to overshadow the mother brand in number of flights. The fledgling airline, which started with 54 flights a week, has now raised the number to 125. It plans to go up to 160 flights in a few months. Compare that with the 110 that Jet Airways flies. Why should Goyal, who has scant respect for the low-cost model despite running Jet Lite as an LCC, strip the airline of the lucrative J Class seats and then set up seats that fetch much lower returns? For instance, a passenger flying on Delhi-Mumbai, the busiest air-corridor in the country, pays about Rs. 20,000 for a business class ticket while the economy traveller pays only about Rs. 4,000. Of course, the fares are dynamic and the airlines keep coming up with new schemes and discount to nudge sales, but the differential between the classes is about 5:1. So whatever happened to Goyal’s belief in extracting premium fares from the high-fliers?
Goyal considered other options including moving some of the Jet Airways fleet to JetLite. The trouble, however, was that transferring the aircraft leases to the subsidiary company was not only time-consuming but would also need the regulator’s clearance.
(This story appears in the 31 July, 2009 issue of Forbes India. To visit our Archives, click here.)