Jet Airways: Cost Reduction Isn’t Good Enough?

Jet Airways (India) Ltd’s shares lost 8% on Tuesday, a day the S&P BSE Sensex ended marginally higher. On Monday, after the markets closed, the company spoke to analysts about its journey and transformation over fiscal 2015-2018. It also conveyed its strategic growth plans for fiscal 2019 and beyond, where enhanced focus on cost reduction was a key takeaway.

Jet Airways said in its investor presentation that it is aiming to reduce its non-fuel CASK by 12-15%. This will be achieved through a number of measures including maintenance cost reduction, reduction of sales and distribution costs, continuous productivity enhancement and better fuel efficiency on over 25 B737-Max aircraft, inductions of which will commence June 2018 and go on till March 2020. CASK stands for cost per available seat kilometre and is a commonly used measure of unit cost for airlines.

According to Ansuman Deb, an analyst at ICICI Securities Ltd, the fact that the company plans to structurally reduce costs is a positive thing. “Jet’s relatively high-cost structure meant that there is a scope for cost reductions and the airline seems to be working for that now,” added Deb. Read More…

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