The Jat saga (Part 2)

 

In the previous thread we looked at the current situation in Jat Airways. We tried to understand why the airline is where it is today by looking at its past and its present. I would love to look into Jat’s future. However I am very afraid of what I might see there, or for that matter, not see!

 

Trying to save Jat is about the same as trying to save a sinking boat. There are so many things that need fixing but not enough time to do it properly.

 

 

In today’s post I will look at Jat Airways and its operations to the Asian continent. By looking at their current operations in that region I will endeavour to see what needs to be done to ensure its survival.

There are two words which should scare Jat: Qatar Airways. Actually, in order for the management of Jat Airways to be afraid of the airline they would need to be aware of its existence. Some time ago I had the (dis)pleasure of talking to one of Jat’s board members, who didn’t know that Singapore Airlines was rated as the best airline in the world. Not to mention that he couldn’t even list the highest ranking airlines in the world.

The reason I mention Qatar Airways is because they are the only threat to Jat’s service to Dubai. Currently Jat operates three flights per week to Dubai using a B737-300 with a stop in Larnaca. Such a long flight can be exhausting on a plane like the 737 (old generation) whose interiors are outdated, offer no in-flight entertainment, and provide mediocre on-board service at best…

The only reason Jat has managed to survive in this market for so long is thanks to the interline agreement with Emirates.

Qatar Airways has been aggressively expanding in Europe. They have been opening new routes from its ever growing hub in Doha to places such as Barcelona and Copenhagen.

Recently the airline announced the opening of routes from Doha to Oslo and Sofia; the latter will pose an indirect threat to Jat.

Qatar announced that the flights to Sofia would operate 4 times per week via Bucharest. Currently this route  is operated via Budapest, however the latter has proven to be a profitable destination in its own right, and as such will be operated directly. With service to cities like Sofia, Bucharest and Budapest the next logical step would be the announcement of Belgrade.

Serbia is an important market for Emirates as it uses Jat to feed its flights on Asian and Australian routes.

A few years ago when the deal with Emirates and Jat Airways was abruptly terminated the Serbian airline was forced to relocate its flights to Abu Dhabi. Shortly after this event Emirates renegotiated the deal with Jat whose withdrawal from Dubai had caused a decrease in Emirates’ loads on the routes to Australia.

If Qatar Airways were to enter the Serbian market I believe it would signal the end of Jat’s service to Dubai.

There are two reasons for this theory. Firstly, the Qatar Airways on board product is far superior to that of Jat Airways. Not to mention that Qatar’s flight would be operated directly non-stop, making it far more attractive.

Secondly, Qatar Airways is an airline whose main priority is not to make profit. With state support they can enter a price war with Jat Airways driving it into major losses resulting in suspension of the route.

With Qatar’s flights perfectly timed for connections to both Asian and Australian destinations this will not only hurt Jat but will not go unnoticed by Emirates. When Jat Airways transferred their flights to Abu Dhabi the Gulf carrier demonstrated how important the Serbian market is for them. One reason why Emirates negotiated with Jat was probably because FlyDubai was not then set up and Belgrade, as a market, was far from ready to handle Emirates.

 

If the above mentioned scenario does take place, what reaction can we expect from Emirates? They are definitely not going to rely on Jat to save the day or launch the route with their own metal, mostly because their smallest aircraft is way too big for Belgrade. Let’s not forget that Qatar’s smallest aircraft that could operate this route is an A319 whereas Emirates would have to use their A330-200.

 

What Emirates might do is strike back by launching Dubai-Belgrade on their lowcost subsidiary, FlyDubai. By using a B737-800 they could compete perfectly with Qatar’s capacity on the route.

 

 

 

While these two mega-carriers would fight each other Jat would have no other choice but to leave the market.

 

 

 

 

Jat’s troubles in the Dubai market are nothing new. They began when Turkish Airlines launched flights to Belgrade, offering convenient connections via Istanbul, using new aircraft and providing excellent service.

So what can Jat do in order to prevent its total collapse in this market? In order for them to even consider surviving on the route they need to launch direct flights and cut out Larnaca.

This can be achieved in two ways, either by acquiring new generation aircraft such as B737-7/800 (Airbus A320 series) or by finding a solution in the old generation market.

The only adequate,old generation plane is the Boeing B757-200. Even if this plane is considered too big for the airline on this route, it will most definitely increase its chances when faced with competition from Turkish Airlines.

If the airline does decide to go with the B757 then the timing must be right. The aircraft needs to be introduced into service in early May, just before the summer rush. Their Dubai flights must be perfectly timed with regional arrivals in order to secure additional feed.

After returning from Dubai the aircraft could be used to operate summer charter flights. By using the B757 on charters it will free some of its B737s to strengthen its scheduled services. For example instead of operating 4 daily flights to Antalya the airline could operate two flights with the B757.

If the airline does decide to go with the new generation models then it should definitely go with Boeing. However if Jat opts for Airbus it will result in extra expenses from introducing a new type of aircraft and in training its crew. But this will mean that it will have two aircraft types in its fleet; something that most airlines are advised against on the grounds of fleet commonality.

If the airline decides to go with new generation aircraft it can lease either a Boeing 737-800 or -700 for the route, in which case the same operational strategy as with the 757 (mentioned above) could be applied. However the 737 could be used on the more competitive European routes. The older B737s can be used for charter flights. The only problem is that the new generation aircraft are more expensive and not that easy to find, especially now when the economy is picking up and airlines are adding capacity.

I believe that Jat Airways should not focus too much attention on acquiring new generation aircraft, at least not for the time being. They should not start to introduce new generation aircraft until they are sufficiently stable to retire their entire old generation fleet. European airlines with this policy include Norwegian who just recently started replacing their B737-300s with new generation B737-800s. Other airlines include airBaltic from Latvia, Aerosvit from Ukraine and Lot from Poland.

In conclusion, Jat Airways desperately needs to revise its strategy in Dubai. Through the interline agreement with Emirates it has access to Asia, Africa and Oceania. It is unacceptable for the management not to seize this opportunity and use it to their own benefit.

In my opinion the airline should go with the B757 simply due to its availability and reliability; not to mention greater comfort on this 6 hour flight. For now the airline needs to concentrate on regaining those passengers lost to Turkish Airlines. In order to achieve this Jat must change and regain the confidence of its passengers.

Unfortunately, I fear that Jat’s present management will neglect the growing threat from the Gulf region. Eventually Qatar Airways will launch flights from Doha, thus destroying Jat Airways. The government will announce that the airline is reporting growing losses and that a new CEO should be appointed. A new CEO will be announced, either a member of  the ruling political party (naturally with no experience in the aviation business), or someone who once worked as a check-in agent and advanced overnight to a high-ranking position!

This vicious cycle will continue until one of the oldest airlines in the world (founded 1927) will be destroyed by the incompetence of its own people.

 

 

The Jat saga continues…at least for now.

 

 

Advertisements

6 Responses to The Jat saga (Part 2)

  1. b 737 says:

    First off all, I would like to support you in this great idea to write about aviation stuff in one place. Second, I could not agree more with you about catastrophic situation in Jat and about their business strategy, if Jat has it at all. I think that for Jat is must to introduce in fleet regional aircraft and to upgrade its ATR 72 fleet, and in that way increase its frequency and become more competitive in high density routes and then introduce new destinations.

  2. Thank You for the support and for the comment.

    Regional expansion is a must, there is no argument there. However there is a problem. If Jat does add additional Atrs to the fleet how will it manage to use it effectively.

    For the sake of the argument, let’s say Jat’s Atr fleet grows to 6. They can operate over-night flights to Skopje, Podgorica, Sarajevo, Thessaloniki, Ohrid and Tivat. Once in Belgrade in the morning, these Atrs need to fly to other destinations. Naturally destinations in Montenegro could have a morning departure out of Belgrade or places like Vienna, Trieste and Istanbul.
    What the airline can do in my opinion is to launch routes to Croatian cities early in the morning and offer affordable connecting opportunities via Belgrade. If the price is decent enough they can strke a deal with tour operators in Macedonia or Greece (Thessaloniki). Not to mention that these flights would be supported by a large number of O&D passengers.
    If Jat organizes these flights to arrive in Belgrade shortly before the second wave of departures then they can slowly start attracting passengers from the coast to transit in Belgrade.

    What I think might not be a bad idea is to get a few second-hand Atr-42’s so that they can open up routes where an Atr-72 might be too big. Routes like Thessaloniki, or Ohrid where they can implement the same strategy as Tarom in Belgrade. Once the loads improve Jat will be able to upgreade the route to an Atr-72 and add frequencies or open up a new route with the smaller aircraft.

    • b 737 says:

      Yes, I agree that combination off ATR 42 i 72 would be ideal. Because, as you can see they are sending B737 to Podgorica, Skopje, Tivat … In that case they could increase daily frequency and also introduce new destinations like Budapest, Sofia, Tirana (not 100% new, but ok :), Croatia, some destinations in Austria like Klagenfurt etc, and not just for O&D market but also for some connection passengers. And off course regional jets are necessary, but now I can not say which will be the most suitable for Jat. Maybe your opinion??

  3. I guess that a Boeing 737-300 is needed on some of thoes routes, more specifically the ones in Montenegro. What the can do is copy Austrian Airlines and their MD aircraft which they painted in a special livery only for that route (I think ”Hallo Zurich/ Servus Wien). They can do something similar, dedicate an Atr only for Montenegro,paint it in some special livery. This is not much but it sure gives some colour to Jat and it will become in some way a publicity trick.

    As for the new routes, I always believed that they can serve some more destinations in Austria (not to mention Germany). Belgrade-Vienna-Salzburg-Vienna-Belgrade operated twice per week could work. That can be a good way to test the waters with secondary destinations.

    As for the regional jets, I believe that Jat should stick with the Atrs for regional routes, that is those up to 1h30. Turboprops are the most economical aircraft for that.
    For longer thinner routes such as Brussels, Berlin, Gothenburg… Jat should go for the Embraer fleet. A fleet of 5-6 Embraer 170s with seating capacity of up to 65 seats would be pefect. All those above mentioned destinations could be served daily. With the E-jets they can expand into new destinations such as Hamburg, Oslo, St. Petersburg… these jets can also be used on routes like Istanbul where an Atr might not be able to compete with Turkish Airlines’ jets.
    I believe that Jat should also open up Belgrade-Istanbul Sabiha Gökcen in order to get some of the Istanbul-Europe market. The airport is much cheaper to fly into and the route could be launched three times pre week with an Atr-42. Also in the beggining they can offer that route to Serbian tour operatoirs in order to sell more seats.

    One thing with the Embraers is that they might not be easy to find on the market. In that case Jat can use the good relations Serbia has with Russia and score a good deal with Sukhoi. The first plane is about to be delivered to Armavia so soon we will know how economical it is.

  4. b 737 says:

    Yes. E-175 will be suitable, especially if we know current Jat LF, and in that way they could introduce new destinations and increase frequency to some very popular destinations (ex morning flight to Paris with 737 and evening with E-175 or some other places). For Sukhoi Super Jet, I believe that it would be good regional jet, but since it is new, and it has to “take some kids disease” for Jat now its not such a good option. In my opinion, but for strategic plan off course.

  5. Thanks for the review, I learnt a lot from it. You have just forgot something, patriotism, which is very important in this case. I would never go with other airline, even if it is cheaper or beter service. Many, if not all of the people I know will do the same. Convenience of having someone that speaks the same language that you do is great, in terms of first language. Further more, such a great service-Emirates, failed to deliver in April this year. There was not a single smile from the crew, service was terible, food tasteless, my son had to wait for half an hour for his child meal to be delivered. This was quite oposite in JAT. I was flying with broken leg, and received no assisstance from the crew in Emirates, which will make me consider their service in the future.
    However, I completely agree with you in regards to the politics involved in JAT. Politicians are doing its best to destroy every good thing in Serbia, and this is the reason we left the country. They are coruptive and very powerfull, so good luck to JAT.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: