At one time Jet Airways was the biggest and the best airline in India. With exponential growth in the aviation market, Aviation Forecasts and more Indians choosing the air travel seemed like the success of Jet Airways inevitable in the years to come with 120 aircrafts flying to more than 1000 destinations, and it did until some recent events that led to a crisis of Jet Airways.
Subscribe to latest updates from MBAVilla.com
This is not the first time Jet Airways got in trouble. During the 2008 financial crisis, the airline aviation market declined.
Passenger numbers were dropped, and that made airlines to lower the prices. Jet Airways did the same as everyone else, but they had two more problems to counter. They had recently bought Air Sahara, which cost them a lot of money.
Secondly, low-cost carriers were introduced and began to dominate the market. Passengers preferred IndiGo because of cheap travel tickets and Jet Airways got into more trouble as their Air Sahara also cost a lot to them. This got them into debt. Instead of reducing operation costs, the chairman of Jet Airways, Naresh Goyal fired 1900 employees. This made employees of Jet Airways go out and protest in the streets. As a result, Jet Airways rehired the employees, but still, the airline was losing its money. But in 2009 Naresh once again showed the world what he did in 2008.
As of May 2019, after consistently missing payments, lessors withdrawn their aircraft from Jet Airways fleet and Indian Oil Corporation refused to serve fuel to the airlines, and on 18th April 2019, the airline departed for its last flight.
Reasons behind Jet Airways Crisis
- Market and competition: Companies like IndiGo, Spicejet dominated Jet Airways as they focused mainly on domestic routes, but Jet Airways preferred international routes that led to increased fuel intake as compared to others. Jet Airways cost structure was 30-40% higher than the FCC. The density of seats was less in FCC than LCC and Jet’s aircraft were involved in the operation. This is one of the reasons which led to Jet Airways Crisis.
- Decreasing domestic passengers: Since low-cost carriers like IndiGo had lower ticket prices, which was much more suitable to Indian passengers than Jet Airways, which resulted in flights taking off unoccupied in turn loss of money.
- Fuel prices: Fuel prices for airlines are extremely high; they generally have to pay 35-40% tax on the purchase of fuel, which in turn results in an increase in the price of tickets. Even though Govt. Of India has subsidized fuel tax on some routes like UDAAN, Jet didn’t have much of flights for those routes.
- Debt: According to reports, Jet Airways had a debt more than 9000 Cr. Banks rejected Jet’s plea for 400cr. Unable to pay for fuel and other services, Jet had to stop operations forcefully. Govt. India also rejected Jet Airways management’s request of 175 Cr. For paying salaries to its employees.
- Buying Air Sahara (Jet lite) and launching of the low-cost carrier- Jet connect for a short time it worked, but in the long term business, it resulted in a loss.]
- Management issues: Continuous recruitment of Human resource by executives resulted in high operational cost, Best industry perks for ground staff even after the poor performance of the airline, different CEOs didn’t work together towards a common goal and each one adding different ways of management resulted in poor leadership and lack of directional knowledge in crisis and, various political factors also influenced in Jet Airways crisis.
In the end, because of this crisis, unfortunately, 16000+ employees had to suffer by losing their jobs.
Despite having a lengthened timeline of twenty-five years, the founder, Naresh Goyal, could do nothing to save its long-lived flourishing Jet Airways. The stakes shifted from 51% to a stooping half of 25.5%. Unable to pay the debt of more 8,200 crores, several young workers were rendered homeless, and all they could do was to silently protest for their rights.
The helpless pilots and other employees were able to seek no other option than help from the government, requesting compensation and government intervention because it was an Indian airline’s association. After limiting the passenger availability to only domestic airports, the flights slowly stopped to specific routes and then totally ceased once the debt started becoming obvious and the expenses could not be met by just offering services to the passengers.
Prime Minister Narendra Modi and Civil Aviation Minister Suresh Prabhu were personally approached and urged to intervene in the matter to look into the unpaid salaries. The pilots also rebelled and continued accepting the provision of rendering services despite being asked to stop until being finally warned to stop flying from 1st April stating that the salaries would not be paid or be delayed if their actions continued to be enforced.
However, Goyal soon made it a point to pass the message of the much needed assured stability of the large staff of 16000 to restart and restore the operations of providing the salaries at the earliest.
On 28th February Goyal willingly gave up his position of a chairman and exited the Jet Airways Company, after which the State Bank of India called for an urgent meeting to discuss a way out of the debt the top-rated airlines was forced to face.
Slowly and gradually all the help from the banks and Qatar Airways reject the stake in Jet Airways leading to Kardassis quit, who was the leading man to keep the turnovers consistent, as the previous CEO. After which a bunch of more employees was executed from their jobs to cut down the expenses of the salaries.
Not long before the Jet Airways completely shut down, the free meals in economy classes were stopped for the passengers leaving them in dismay and also indicated a high droop in the free flow of services.
The Jet Airways was not a sudden drop in the market shares, it was a slow and gradual process as it became a prey to the quicksand and eventually, there was no option left to stick out of it.
The term white revolution mainly came up because India was a country that absolutely lagged in the production of dairy products, but with help, guidelines, suggestion, motivation and most importantly understanding the crisis of the country brought about sudden changes within the people where they started breeding a large number of dairy-producing animals and their products.
India is online shopping heaven for customers, with population armed with smart gadgets and phones which has made everything a click away for people. But Is E-commerce Hampering the Growth of Small Retailers?