Read the following passage and answer the questions that follow.
In calendar year 2008, there was turbulence in the air as Jet Airways' Chairman pondered what course of action the airline should take. Air India was also struggling with the same dilemma. Two of India’s largest airlines, Air India and Jet Airways, had sounded caution on their fiscal health due to mounting operational costs. A daily operational loss of 2 million USD (Rs 8.6 crore) had in fact forced Jet Airways to put its employees on alert. Jet’s senior General Manager had termed the situation as grave. Jet’s current losses were 2 million USD a day (including JetLite). The current rate of Jet Airways’ domestic losses was 0.5 million USD (Rs 2.15 crore) and that of JetLite was another 0.5 million. International business was losing over 1 million USD (Rs 4.30 crore) a day.
The situation was equally grave for other national carriers. Driven by mounting losses of almost Rs 10 crore a day, Air India, in its merged avatar, was considering severe cost cutting measures like slashing employee allowances, reducing in-flight catering expenses on short haul flights and restructuring functional arms. The airline also considered other options like cutting maintenance costs by stationing officers at hubs, instead of allowing them to travel at regular intervals.
Jet Airways, Air India and other domestic airlines had reasons to get worried, as 24 airlines across the world had gone bankrupt in the year on account of rising fuel costs. In India, operating costs had gone up 30-40%. Fuel prices had doubled in the past one year to Rs 70,000 per kilolitre, forcing airlines to increase fares. Consequently, passenger load had fallen to an average 55-60% per flight from previous year’s peak of 70-75%. Other airlines faced a similar situation; some were even looking for buyers. Domestic carriers had lost around Rs 4,000 crore in 2007-08 with Air India leading the pack. “As against 27% wage bill globally, our wage bill is 22% of total input costs. Even then we are at a loss," an Air India official said. Civil aviation ministry, however, had a different take: “Air India engineers go to Dubai every fortnight to work for 15 days and stay in five star hotels. If they are stationed there, the airline would save Rs 8 crore a year. This is just the tip of the iceberg. There are several things we can do to reduce operational inefficiency.” According to analysts, Jet Airways could be looking at a combined annual loss of around Rs 3,000 crore, if there were no improvement in operational efficiencies and ATF prices. Against this backdrop, the airline had asked its employees to raise the service bar and arrest falling passenger load.
Question: 1
Which of the following are the reasons for Jet Airways not doing well?
1. Rising ATF prices
2. Reduced passenger load
3. Declining service quality
4. Staff travelling to Dubai
Show Hint
Always separate the reasons directly linked to the subject of the question (Jet Airways) from those mentioned about other airlines (Air India here).
From the passage, Jet Airways was facing heavy losses due to rising fuel (ATF) prices. This is explicitly mentioned.
It is also mentioned that passenger load had fallen from 70–75% to 55–60%, so reduced passenger load is another valid reason.
Declining service quality is not stated anywhere in the passage. Jet had in fact asked its employees to raise service quality, but no evidence is provided that service quality decline was a reason for losses.
Staff travelling to Dubai is mentioned, but that problem was related to Air India engineers, not Jet Airways. Hence, it does not apply here.
Therefore, only statements 1 and 2 are correct.
\[
\boxed{1 \text{ and } 2}
\]
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Question: 2
The total loss for the airline industry was likely to be Rs. 10,000 crore. Jet Airways lost Rs. 3,000 crore, Air India lost Rs. “X” crore and “rest of the airlines” lost Rs. “Y” crore. What was the loss for the “rest of the airlines”, in 2008?
Show Hint
For such questions, carefully calculate daily losses into yearly figures, especially noting leap years (366 days).
Total industry loss = Rs. 10,000 crore.
Jet Airways loss = Rs. 3,000 crore.
Air India loss = Rs. 10 crore/day $\times$ 366 days (leap year) = Rs. 3,660 crore.
Rest of airlines = Total – (Jet + Air India).
\[
= 10000 – (3000 + 3660) = 10000 – 6660 = 3340 \text{crore}
\]
\[
\boxed{3340 \text{crore}}
\]
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Question: 3
Suppose fuel constitutes 30% of the revenues, do you think airlines would be in a better situation by reducing prices?
Show Hint
When faced with incomplete data, always check whether the given percentages apply to revenues or costs. Business decisions require both sides of the equation.
The problem states fuel constitutes 30% of revenues, but we do not know how much of operating costs is accounted for by fuel.
Without knowing the proportion of costs (not just revenues), we cannot assess the impact of reducing prices.
Additionally, we are not told how much passenger load would increase if prices were reduced. This demand elasticity information is crucial.
Therefore, there is insufficient data to make a conclusive decision.
\[
\boxed{\text{Data insufficient to reach decision}}
\]
