Will Jet Airways’ Grounding Spoil Summer Holiday Plans?

Costlier airfares after a crippling financial crunch grounded Jet Airways (India) Ltd. threaten to impact business travel and hotel bookings as India heads into summer vacations at schools in May, usually a period of high demand.

Leisure travellers plan trips and book tickets at least two months in advance and are not impacted by Jet Airways halting its flights, said Sharat Dhall, chief operating officer at travel portal Yatra.com. It has impacted mainly business travellers, he said, as last-minute fares have gone up by 25-30 percent.

But according to Sia Mutreja, director at travel agency Trip Kraft, leisure travellers who had booked Jet Airways flights are struggling. Travellers who had booked tickets two months ago are now looking for alternatives as hotel bookings are non-refundable, she said. Still, many are putting their plans on hold and cancelling bookings, Mutreja said, adding that the business for April is already down more than 10 percent over last year.

Jet Airways, which owes lenders Rs 10,000 crore, temporarily shut operations starting April 17 as it has no cash to pay employees and aircraft lessors. Lenders that earlier promised to infuse Rs 1,500 crore also backed out, saying they are now looking for investors. While Spicejet Ltd. has added some of the grounded planes, the capacity pulled out of the market has sent travel plans haywire. Jet Airways till last year operated more than 600 flights every day, according to its website, before it started pulling out planes.

“Withdrawal of Jet Airways’ flights has had impact given that we are at the start of India’s peak vacation season and in light of increased demand across both India’s metros as also strongly emerging regional markets,” Indiver Rastogi, president, global business travel at Thomas Cook (India) Ltd., said in an emailed response. The first priority is to assist already-booked holiday customers in coordination with airlines and tour operations to provide best available options and alternate flights, he said, adding that last-minute customers are likely to defer travel in anticipation of stabilisation of fares.

Airfares to select international points have also surged also as capacity has come down significantly, said John Nair, head of business travel at Cox & Kings. Destinations such as Thailand, Singapore and Malaysia are still available at reasonable fares as many low-cost carriers fly to these destinations, he said.

Mutreja said although local budget airlines of these countries are still available at cheaper rates, people want to travel full-service airlines when going overseas. Full-service airfares for the destinations Jet Airways had direct flights to like Dubai, Malaysia and Singapore have increased by 100 percent, she said.

Moreover, according to her, Jet Airways had very good code-share pacts with international airlines, allowing people to cut costs by breaking journey between the now-grounded carrier and a local airline in that nation. Now that Jet Airways has halted flights, direct flights on international airlines will be expensive, she said.

Hotel occupancies for both business and leisure segments will also get affected, said Vishal Kamat, chief executive officer at Kamat Hotels (India) Ltd. Corporates won’t want their employees to fly at such high rates and the disruption will take two to three months to settle down, he said.

Not everyone agrees. Dhall sees the capacity crunch not lasting beyond two months, adding that for Yatra it’s business as usual. Lemon Tree Hotels Ltd. said they don’t see much impact, refusing to comment more citing silent period ahead of the earnings.

Thomas Cook’s Rastogi said with the introduction of special fares by carriers like Air India, reports of dry and wet leasing of Jet Airways’ aircraft, coupled with optimisation of airport slots will increase capacity and stabilise fares.

Rajeev Newar, executive director at Chalet Hotels Ltd., said most airlines are adding a large number of flights and that will help contain prices. April is usually not the most robust month for the hotel industry, he said, and it’s better that the disruption happened before the peak summer demand kicks in. And he doesn’t expect business segment to get impacted much as “most corporates are less price sensitive”.