From the First Takeoff to the Final Landing : Jet Airways

After single-handedly ruling the aviation industry for almost a decade, Jet Airways decided to cease its operations on 18th April 2019 after running out of funds.

The first takeoff of Jet Airways traces back to the Air Corporation Act of 1992 when the Indian government announced Open Skies Policy. Along with several other airlines like East-West Airlines, Air Sahara etc, Jet Airways came into the aviation business. Very soon, some of them merged with Jet Airways, hence raising its share in the Indian aviation market. Jet Airways continued to grow its profit margins year after year and made its first international alliance in the year 1995 with KLM Airlines. By the end of year 1997, Jet Airways became India's largest private airlines and reached a milestone.

In the 2000s, other airlines like IndiGo, GoAir, SpiceJet etc emerged in the airlines business. They started following a business model of providing cheap tickets to the customers and high passenger load factor. This move led to a tremendous increase in the number of air travellers in India. Meanwhile, Jet continued to put the corporate before low-cost services which was one of the mistakes they failed to recognise at that time. In 2005, Kingfisher became another new player in this field and posed a threat to Jet Airways.

In 2005 itself, Jet Airways raised billions from the IPO. The company's horizons started getting broader and the airlines expanded to many other countries.

In order to maintain supremacy, both Jet Airways and Kingfisher started buying other smaller airlines in the business. In 2007, Jet Airways acquired Sahara Airlines in $500 millions which was probably the biggest mistake it made till date. The deal was nowhere justified and CEO Naresh Goyal was criticised for spending such a hefty amount. It was the first step leading towards the company's financial crisis. Sahara Airways was renamed as JetLite which unfortunately couldn't bag much for the company. Amidst the internal problems faced by Jet Airways, there was an enormous growth by IndiGo, SpiceJet and GoAir due to their cost-efficient tickets strategy. Jet Airways was forced to bring down the tickets' cost and hence for most of the times, tickets were being sold at break-even price, although they continued to provide premium services without making any compromise with that. They also continued to provide their employees the same lucrative services as earlier. This led to big downfall for the airlines.

After facing major losses, Kingfisher had to shut down in 2012. Jet Airways was also facing a similar situation but at that point, Etihad came in limelight by buying 24% of stakes and the airlines survived. Even at that time, they didn't compromise with their high class services and continued to make loss.

Indian government scrapped the 5/20 rule in year 2016 and replaced it with 0/20 rule. Under 5/20 rule, Indian airlines had to survive for a minimum of 5 years with a minimum of 20 aircrafts in order to fly overseas. It became a turning point for new airlines in business whereas for old airlines like Jet Airways, it came as a shocking loss.

The fluctuation in crude oil prices and falling value of rupees in international market led Jet Airways to an extremely bad financial health. In August 2018, the company reported a loss of $189 millions due to the same. Been through a series of losses in the industry, Jet Airways shut down on 18th April 2019.

According to The Economic Times, Etihad offered Rs 1700 crores to Jet but the liabilities on Jet Airways exceed an amount of Rs 36000 crores. In order to function fully, Jet needs an investor who heavily invests in the same. Almost all of Jet's assets have been mortgaged to the banks and in such a scenario, no investor seems to be interested in taking such a huge risk.

So where did Jet Airways exactly lose its ground? Was it the acquisition of Sahara Airways or was it the failure to compete with cost friendly airlines? Was it Naresh Goyal's bad financial strategy? Whatever be the reason, the fact is that the entire aviation industry has been affected by Jet's financial predicament. The total industrial capacity has faced a downfall of 15%. Though government is trying to help the employees of Jet, it really needs to bring some major reforms in aviation sector for private airlines. Seeing no investers interested and the debt on the airlines, it is pretty difficult to assume that India's second biggest airlines will ever be back in business or not.

– Ankita Singh