Jet Airways' [Get Quote] aborted plan to cut 1,900 staff partially reflected the crisis in the aviation industry.

Analysis by Business Standard shows that Indian carriers will need to cut their domestic fleet and manpower by a fifth in the next few months to fully align themselves with the slowdown in passenger growth.

Domestic carriers, which include Jet Airways, Kingfisher Airlines, Air India (for aircraft that fly domestic routes) and the low-cost carriers, have a combined fleet of over 300 aircraft.

Some 60 aircraft will have to be withdrawn from this fleet if airlines hope to increase the passenger load factor -- a measure of capacity utilisation in aircraft -- to around 80 per cent, which is required to break even. 

The average PLF over the last few months has been 50 per cent.

According to the Centre for Asia Pacific Aviation, in the opening busy-season month of October, the average PLF was 60 to 65 per cent, at least 10 per cent less than last year's numbers.

A decrease in capacity by 20 per cent on key routes assuming air fares and demand are constant would lead to PLF rising 20 per cent.

Airlines have already cut passenger capacity by 10 to 15 per cent according to aircraft manufacturer Boeing in the last few months but that, of course, is not enough.

The carriers also need to cut manpower by around 12,000 people out of the 60,000 employees working in domestic aviation if they are to stop making losses.

The number is based on the fact that the average employee-to-aircraft ratio in India is1: 200 (this number might be slightly skewed because state-owned Air India's ratio is 1: 300).

In fact, analysts said, the job cuts need to be higher if the airlines want to achieve global aviation standards of 150 employees per aircraft.

"The cut has to come from full-service carriers because low-cost carriers have only 100-odd surplus employees," said a senior executive with a low-cost carrier.  

Considering the strong opposition from political parties of all hues to Jet's plans to lay off unconfirmed cabin crew, carriers are, however, unlikely to push through such a major cutback.

Kapil Kaul, CEO, CAPA (India and Middle East), pointed out, "There is still 20 per cent excess capacity in the Indian market and we will see the three big players- - that is Jet Airways, Kingfisher Airlines and Air India --  pull out at least 30 aircraft from the system in the next round of rationalisation .

"This would also mean more job losses but airlines might resort to keeping the excess flab on board and resort to multiple cost reduction measures."

In fact, carriers are now looking at ways to reduce salaries and retrench expatriates (many of them pilots) as a way to cut costs.

State-owned Air India has announced a leave-without-pay scheme to over 15,000 employees, a proposal it is yet to discuss with the unions.

The airline, however, does not expect more than 1,500 employees to take the offer.

A senior Kingfisher Airlines executive added that if fares increase more than 10 per cent and load factors rise to 80 per cent then airlines will break even in most sectors. 

In fact, Kingfisher and Jet are already planning to do just that, according to industry experts.

With the additional support of Manisha Singhal & Anirban Chowdhury

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