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What Went Wrong With Jet Airways?


Posted on 2019-03-31 in WEALTH NOTE RESEARCH

 

Jet Airways — which took to the skies in 1993 — was the country’s premier private airline. Jet redefined service standards and showed people that flying could indeed be a pleasurable experience. It came like a breath of fresh air for a country tired of the stodgy Indian Airlines and its public sector look and feel. Jet added frequencies, smart aircraft and cabin crew, giving a new lease of life to aviation in India. Jet airways was formed at a time when air travel in India was only for upper class and upper middle class. Thus cost control wasn’t something to be concerned about. Jet did extremely well and won the hearts of passengers till 2005. Quality service was the main point of jet’s business model. Not to mention it’s the only private airline of the 90s era which is alive today. Dozens others are dead.

The airline has been reportedly defaulting on employee salaries for some time – making partial payments in some cases or not paying at all. The Naresh Goyal-controlled carrier had a gross debt of Rs 8,620 crore as on June this year, and net losses of Rs 724.94 crore in 2017/18. The airline has a negative net worth of over Rs 7,000 crore. Biggest problem areas are beyond his control. Aviation turbine fuel prices and depreciating rupee. With reports of crude oil prices heading north, there’s clearly no relief in sight for Jet.

It has lost its dominant position in the domestic skies. The market share of Jet Airways and JetLite together has slipped from 21.7 per cent at the end of December 2014 to 17.8 per cent at the end of December 2017. Yet, it cannot be described as having a clear and strong presence in the international movements in and out of India. Second reason why frequent fliers are ‘not so frequent’ is that the airline is missing on many key routes. The Delhi-Hyderabad route, for example, is undeserved with only one flight a day. Jet is also absent from other routes like Kolkata-Bengaluru and Kolkata-Chennai. Observers and commanders cannot understand the reason for what they see as Jet’s withdrawal from many domestic sectors.

As a slew of budget carriers started flooding the market in the mid-2000s, offering no-frills, yet on-time flights, Jet Airways began dropping fares, some to below cost. On top of that, provincial taxes of as much as 30 per cent on jet fuel added to its expenses, while price-conscious Indian travelers refused to pay a premium for on-board meals and entertainment. Unlike budget operators, full-service airlines such as Jet Airways offer such amenities mostly for free. Jet Airways lost money in all but two of the past 11 years and has Rs 72.99billion ($1 billion) of net debt.

Sources

Economic times

Times of India

Business Standard

The Hindu Business Line

Reuters







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