Jet Airways Predicts Return of Premium Travel to Bolster Europe

April 13 (Bloomberg) -- Jet Airways (India) Ltd., the carrier that says it was first to offer private suites in first class, predicts that business travelers will return to premium seats, helping fuel the airline’s expansion in Europe.

“We are seeing more confidence in the corporate market, and some of the more draconian travel policies are starting to loosen,” Raja Segran, Jet’s head of European operations, said in an interview. “Last year was a difficult year for us, but the worst is behind us.”

Jet, India’s largest airline, leased out part of its long-haul fleet, delayed plane orders and pared services during the global recession. At the same time, the carrier made improvements in business class, including becoming the first to offer complimentary Dom Perignon champagne.

Corporate flyers are starting to come back to more luxurious -- and expensive -- seats after a slump that followed the bankruptcy of Lehman Brothers Inc. in September 2008, Segran said. The airline, which makes more than half of its revenue from international flights after starting as a domestic carrier in 1993, plans to resume expanding in Europe by 2011, he said.

Segran has seen air traffic rebound from slumps before during a career spanning three decades. The 54-year-old executive worked for Singapore Airlines Ltd. for 26 years and joined Mumbai-based Jet in December 2007.

“In the past there has always been a kneejerk reaction, and then business travelers have always returned,” the executive said.

Filling Planes

Jet’s aircraft are already flying fuller, hitting the 78.8 percent mark in February, compared with 73.8 percent a year ago. The increase in the so-called load factor isn’t coming at the expense of ticket charges. Jet predicted April 9 that prices will rise as much as 15 percent in the next three months, improving profit margins.

“Load factors are becoming stronger but we are also seeing a firming up of prices,” said Segran. “Yields still have some way to go, but they are improving.”

Jet currently offers flights to North American destinations including New York’s John F. Kennedy International airport, from its European hub in Brussels. The airline also offers direct flights to London’s Heathrow airport from Delhi and Mumbai.

Jet may return to profit in the next 12 months as demand improves, according to Kapil Kaul, chief executive officer of the Indian unit of the Centre for Asia Pacific Aviation. The carrier, which hasn’t yet reported earnings for the year just ended, had a loss of 4.7 billion rupees ($106 million) in the fiscal year ended March 31, 2009.

Share Performance

The airline has more than doubled in the past 12 months in Mumbai trading, trailing SpiceJet Ltd., a low-cost carrier whose stock has quadrupled. Kingfisher Airlines Ltd., a Bangalore- based full-service competitor, gained 37 percent in that period. Jet Airways has leased out all but three of its Boeing Co. 777 long-haul aircraft to other carriers and is relying on its fleet of 12 Airbus A330-200 planes to fly the majority of its long-haul services, Segran said. Jet also deferred deliveries of Airbus SAS A350 widebody planes and Boeing’s 787 Dreamliner following the slump in demand.

Air travel in the Asia Pacific region increased by 13.5 percent in February compared to a year earlier, according to the International Air Transport Association. Traffic in the first two months of the year rose by 10 percent, while Europe’s growth rate was 3.5 percent.

Jet Airways started a low-cost domestic brand called Jet Konnect in May last year in response to greater demand for no- frills services, removing business-class seats from the aircraft and replacing them with a larger coach cabin.

Discount Service

Jet, which generates 44 percent of its revenue from the domestic market, also owns the low-cost carrier JetLite, which it rebranded after acquiring Sahara Airlines Ltd. in April 2007.

While premium international service is the carrier’s primary strategy, it needs a low-cost plan as well, Segran said April 9 in London, where the senior vice president is based. “If you’re not a player in that market, your fortunes will be dented.’

The Jet Konnect model may change as demand recovers, the executive said.

“If we wanted to reconvert Konnect back to full-service, it could be done without difficulty,” he said. “We are hopeful as the economy recovers, and demand and businesses grow.”