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India's Jet Air shelves unit's international plans

Jet Airways Ltd , India's top private carrier,shelves plans for its discount unit JetLite to fly on international routes because of the tough market environment.
Reuters | By HT Correspondent, Mumbai
UPDATED ON JUL 01, 2008 08:11 PM IST

Jet Airways Ltd , India's top private carrier, has shelved plans for its discount unit JetLite to fly on international routes because of the tough market environment, a senior official said on Tuesday.

Soaring oil prices have prompted Indian carriers to raise fares and trim routes in a bid to cushion falling margins.

"In the current scenario, we cannot operate new routes, as they take time to develop and yield returns," Rajeev Gupta, chief executive of JetLite said.

"New routes take at least 90 days to develop, and we cannot afford that now when ATF prices are so high. So we've put our international plans on hold until prices come down. If they don't, we will consider other strategies."

Jet Airways last month said it would put its own international expansion on hold until the end of next year, when it is scheduled to take delivery of new aircraft.

JetLite, the erstwhile Air Sahara that Jet Airways acquired in 2007, had received rights to fly to Bangkok, Sharjah and other destinations in the Middle East starting in the summer of 2008.

"We will look for further synergies with Jet Airways in the domestic market to cut costs and reduce frequencies of some short-haul routes which are not viable," Gupta said, adding the carrier would axe 25 routes to cut aircraft utilisation.

"But how much we are able to improve will really depend on ATF prices, which show no signs of abating."

Fuel makes up about 45 percent of an airline's operating cost, and domestic aviation turbine fuel (ATF) prices have risen by nearly half since January on the back of record crude oil prices.

Indian jet fuel prices are about three-quarters higher than international benchmarks, and may cause domestic carriers to double their losses in 2008/09 from 40 billion rupees ($924 million) a year ago, the civil aviation secretary has said.

Jet Airways last week posted a loss of 2.53 billion rupees for the year to March and said it expected the next few quarters to be very challenging.

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