Pilots’ strike: Everyone's benefitting except the affected airline
Given the turmoil and sudden strikes in the airlines industry, operators offering alternate services like flight pools are witnessing a surge in demand. Not to be left behind, even the Indian Railways tried its hand to woo passengers stranded during the Air India pilots’ strike.
 
The strike by Jet Airways pilots which lasted for about five days in September, proved costly for the airline resulting in a loss of about Rs2 billion. Jet Airways carries around 24,000 passengers and its revenues are in the range of about Rs400 million, per day.
 
Air India, the national carrier, has been a loss-making entity for years. During the full year to end-March, the carrier posted a loss of over Rs50 billion and had to seek a bailout from the Union government. According to the Federation of Indian Airlines, during the 12 months to end-March, the domestic carrier suffered a loss of Rs100 billion.
 
Last month, during the Jet Airways pilot's strike that lasted for five days, Airnetz Aviation Pvt Ltd's unit Airnetz Charter operated around four flights with 30 bookings, compared with just one flight a week in normal course. Similarly, during the Air India pilots’ strike, the flight pool service provider had six bookings. Majority of these flight pools were on the Mumbai-Pune and the Mumbai-Ahmedabad route, Airnetz said.
 
During the airlines strike, flight pool services are required by business and first class passengers coming from international destinations having their connecting flights on the affected airline, said Omkar Mistry, chief operating officer, AirnetzCharter.com, in a release.
 
On an average, the company operates around 15 flights a month, out of which four are flight pools. Typically, travelling on a flight pool basis would cost you 30% to 40% premium than your business class ticket on any airline. The 40% premium becomes a profitable option during crisis times, as fares for bookings on other airlines also shoot up considerably.
 
With Air India pilots' agitation resulting in cancellation of flights, especially from Delhi, private airlines like Indigo, Jet Konnect, Kingfisher Red and JetLite were reported to be operating with a full load. Many passengers cancelled Air India bookings and preferred private airlines on Delhi and Mumbai routes, during the crisis.
 
According to media reports, Indigo's newly introduced flights to New Delhi, reported about 80% load factor while JetLite's flights to Mumbai were also operated with almost the same load factor.
 
The Indian Railways too has tried to cash in on this opportunity. During the Air India pilots strike, the Indian Railways set up train passenger reservation counters at all important airports throughout the country for the convenience of stranded passengers who wanted to travel by train.
–Yogesh Sapkale with Amritha Pillay  [email protected]
 

 

User

Real No. 1?
Domestic consumer products companies are relentlessly catching up with bigger foreign rivals....
Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital+Print Access

Subscribe

Moneylife Magazine Subscriber or MSSN member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
Aggressive banks caught up in festive spirit
The festive season brings with it all sorts of attractive offers for consumers. Banks, not ones to be left behind, have come out with their own offerings, much to the pleasure of the consumers. Almost all leading banks have slashed interest rates on home and auto loans, in a bid to capture the likely demand during the festive season. SBI started the price war in the car loan segment in late June when it slashed rates to 8% for the first year and 10% for the next two years. Axis Bank recently upped the ante by slashing loan rates by 150-200 basis points to 8.5% on loans taken between October1 and December31. Following this, Kotak Mahindra Bank and HDFC Bank also cut rates by around 50 basis points. IDBI Bank has also recently cut its new home and auto loan rates by 25 to 50 basis points. As part of its festive offer, it will charge 8.5% for loans taken between October1 and December31.
 
The competition is heating up in the home loan segment too. SBI took the lead in August when it announced that loans up to Rs5 lakh would be offered at a fixed rate of 8% for five years. It also offered to charge 8% for the first year on loans up to Rs 50 lakh and cap them at 8.5% in the second and third years. IDBI Bank has also slashed home loan floating rates by 25-50 basis points. Under the new scheme, rates for home loans up to Rs 30 lakh will be 8.75% as against the existing 9%. Bank of India, ICICI Bank and Union Bank have come out with their own versions of sweet deals.
 
While consumers are rubbing their hands in glee, banks may have to bear the burden of reduced margins. For, while interest rates on advances have been revised downwards, the cost of funds for banks is not letting up at the same pace. Adding to this are the overheads and loan delinquencies which further erode banks’ profitability. Already, several banks are reeling under squeezed margins. The reported NIMs for banks like SBI, Bank of Baroda and Union Bank in the June quarter were as low as 2.3%-2.4%. Chanda Kochhar, MD and CEO, ICICI Bank believes that such irrational pricing doesn’t make economic sense. Speaking to Moneylife, she said, “I hope that as the credit demand picks up, this irrational pricing should disappear. Today people are doing irrational pricing as there is excess liquidity. NBFCs too were contributing to irrational pricing. For them too the cost of funds would go up. We are clear at what point it makes economic sense to do business.”
 
This raises questions regarding the sustainability of low loan rates in the near future. While the downward revision may work well for banks in the short-term, they will eventually feel the pinch of high cost of funds.
Sanket Dhanorkar [email protected]
 

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)