US firm to advise India’s Jet Airways

MUMBAI, India - Jet Airways has appointed U.S.-based consultant Seabury Group to prepare a market study on route network and fleet, to help the airline and its strategic partner Etihad Airways to chal

US firm to advise India’s Jet Airways

MUMBAI, India – Jet Airways has appointed U.S.-based consultant Seabury Group to prepare a market study on route network and fleet, to help the airline and its strategic partner Etihad Airways to chalk out a plan to expand operations and acquire planes.

“The consultant will study how the Indian and middle eastern market will pan out for the next ten years and is likely to turn in its report in a month or two,” said two people close to the development.

A close study of the market’s current and future potential is crucial for both airlines as this is the first strategic alliance between an Indian and foreign carrier.

The Indian government last September allowed international carriers to pick up stake in the country’s airlines. On April 24, Jet announced Abu Dhabi-based Etihad would purchase 24% stake in it for $379 million.

A study is also essential to tap the various areas of synergy such as plane acquisitions, lease agreements, ticketing partnerships and fuel purchase that can be looked into by the airlines.

Moreover, the alliance would connect the Indian sub-continent and the middle-east, two regions with the highest potential for growth in aviation.

Seabury was in 2010 appointed by ailing carrier Kingfisher AirlinesBSE 4.85 % to advise on cutting its losses, increasing revenue and restructuring its debt.

It has also advised on the Etihad’s partnership with Air Berlin, Europe’s sixth largest carrier, where it owns a 29.2% stake.

While the company didn’t comment on what it’s doing for Jet-Etihad, there would be some similarities to what it advised on Etihad’s tie-up with Air Berlin.

Jet is the fifth in the airline’s list of strategic partners which also includes Air Seychelles (40%), Aer Lingus (2.99%), and Virgin Australia (10%).

Under the Etihad-Air Berlin partnership, the two carriers decided to have more than one hub-Etihad’s Abu Dhabi hub to be the gateway to Asia, the Middle East, the Indian subcontinent and Australia, while Air Berlin’s hubs in Berlin, Dusseldorf, Palma and Vienna would be the gateways to Europe, North America and the Caribbean.

The person close to the Jet-Etihad deal said in this case too, Jet would retain a hub in the west, while concentrating on Abu Dhabi as the hub for Asia and the Middle East.

Also, Etihad’s CEO James Hogan and CFO James Rigney joined Air Berlin’s board, an arrangement it’s also likely planning for Jet.

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Jet recently altered its shareholders agreement, cutting the number of Etihad’s nominees on its board to two from three, an alteration directed by India’s capital markets regulator.

The Etihad-Air Berlin agreement has also explored synergies from a joint sales and distribution channel and frequent flyer programme, shared negotiations with lessors and a new revenue system.

According to its latest shareholder agreement, Jet and Etihad too plan to a joint sales team, a shared customer service team and a commercial marketing team having three members each from the two airlines.

Etihad’s research-driven synergising initiaves have definitely yielded benefits for its partners, something that bodes well for Jet.

During the second quarter of this year, Air Berlin cut its net loss to EUR 38 million from EUR 99.8 million, a year earlier.

Apart from cost saving initiatives, this was largely driven by higher traffic from codeshare programmes with Etihad. The number of number of passengers from codeshare for Air Berlin tripled to 267,000 in the first six months of this year, compared to the year earlier period.

Etihad’s other partner Air Seychelles in March reported an annual net profit of $1 million, its first in three years, after only one year of a management contract with Etihad.

While Seabury works on its report, Jet has already begun to recruit crew for its expansion plans, according to the person in the know.

“There are pilots and other crew constantly being tested and interviewed. If the airline is allotted additional seats in the winter schedule which starts October, it has to be ready with at least some expansion plan,” he added.

Right after the Jet-Etihad deal was announced, India’s civil aviation ministry proposed the number of weekly seats allocated between India and Abu Dhabi be increased to 53,000 seats per week from 13,300 per week now.

Subject to getting final regulatory approvals, Jet’s immediate expansion plan includes adding services between Abu Dhabi and eight Indian destinations including Ahmedabad, Mumbai, Delhi, Kochi, Chennai and Trivandrum and six new destinations in the country. It also plans to start new flights from India to North America, via Abu Dhabi.

The person also said that once the partnership is forged it may not make sense for Jet to maintain two separate brands-Jet and its low fare service Jet Konnect-and that it may retain only the eponymous full service brand.

Also, Jet has already sought the civil aviation ministry’s approval for placing an order for 50 Boeing Max 737 planes, which it wants to induct to its fleet between 2018 and 2020.

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