Jet Airways, based in Mumbai, started its operation in 1992. The privately-owned carrier had 120 aircrafts and over 1,000 destinations to serve. However, in April this year, Jet Airways flew its last flight from Amritsar to Mumbai.
So, why did one of the most successful airlines fail? What happened to the airline that it could not breathe in the sea of airline businesses? Here are few factors to help understand the unfortunate horizon of Jet Airways.
The bad luck began back in 2006, when they purchased Air Sahara with an investment of $500 million and most shockingly, they made the purchase in cash. Naresh Goyal, a non-resident Indian businessman and founder chairman of Jet Airways, made the decision. Many experts had advised him not to go with the decision as the price was too high, but he did not listen to any warnings.
Also, they rebranded the budget carrier as JetLite. But by 2015, Jet Airways wrote off its entire investment.
An ancient Chinese philosopher has a saying: “There is no greater danger than underestimating your opponent.” Exactly the same happened to Jet Airways. SpiceJet entered the aviation market in 2004 and IndiGo entered in 2006 as low-cost carriers. As the financial crisis increased, it impacted traveller numbers and led to low cost airliners dominating India’s skies.
Passengers started preferring low-cost carriers, but Jet Airways didn’t pay any attention to the changing market scenario. Moreover, the JetLite was not a low-cost carrier. So, instead of making profit, it was an additional burden to incur more costs in terms of aircrafts, routes, and parking slots.
One of the core reasons for Jet Airways failing is the chairman’s management style. The company had only one management team, and this was lead by Naresh Goyal himself. He made terrible decisions which were terrible for the organization’s sustainability. He made bad investment decisions, and fired close to 2,000 employees at a time which brought visible protests.
The pilots of Jet Airways formed a union named National Aviators Guild. The management sacked two key players of forming the union. Experts believe that Mr Goyal should have had two separate management teams to run the full service carrier and budget flyer. In the overall scenario, Jet Airways spent more -- much more than what it was earning -- which resulted in the stacking of debt.
All Indian airlines are very sensitive to the global fluctuation of crude oil prices, because India is a major importer of crude oil. When the rupee was becoming weaker, the biggest cost for airlines, oil, became very expensive for all airlines. SpiceJet and IndiGo also suffered for the scenario. However, due to being in so much debt, Jet Airways suffered the most. The situation made Jet Airways accrue even more debt.
Flow of money is the key and Jet Airways failed to find the golden goose. The chairman failed to attract any strategic investors to pitch in with big amounts of money, and that lead to the organization facing a major financial crisis. Also, the negative incidents that Jet Airways faced all contributed to lowering the share prices for Jet Airways.
The talk with Tata failed to lead anywhere, and there was no investment made in Jet Airways last year. Etihad Airways had a 24% share of Jet Airways, and they refused to increase the volume of their shares. Also, Etihad asked State Bank of India to buy their shares.
There appears to be no light of financial hope coming, and Jet Airways is on its way to be the first Indian airline to collapse after Kingfisher Airlines stopped operation in 2012.
Tarif Mohammed Khan is a corporate trainer and brand-building professional.
