How did Jet Airways become a Tragic Story?

“It is indeed a tragic day for the Indian aviation sector. Jet was the pioneer among private sector full-service carriers in India and consistently figured among the most-loved airlines for its warm hospitality and stellar service standards. Jet’s failure follows a raft of other failures in the sector like Kingfisher, Deccan, Sahara, etc. The national carrier Air India is a basket case kept alive by the government by infusing thousands of crores of taxpayers revenues”, said Ajay Bodke, chief executive officer of Prabhudas Lilladher, in an article in the Economic Times.

Jet Airways, an Indian international airline based in Mumbai, which was the second-largest airline in India after IndiGo, recently took a decision to temporarily suspend all its flight operations. From operating over 600 daily flights to coming down to just one-fourth of it, the Jet Airways airline has been going through extremely hard times. In 2018, the airline was operating almost 123 planes but today the number is less than 10. The airline has reduced frequencies on overseas routes and also announced the suspension of 13 international routes till end-April.

The crisis became more visible when the airline’s founder and chairman, Naresh Goyal and his wife Anitha Goyal (Board of Directors) resigned from the airline in order to pave way for the airline to safeguard much-needed funds from the lenders.

In less than six months, the airline has faced a negative financial outlook due to increasing losses. Here are some reasons that have led to this gradual downfall of the airline:

Fuel Burden and Supply

Jet Airways always used aviation turbine fuel (ATF) to fly on international routes but due to an increase in the cost of ATF during June to September 2018, the airline was forced to spend more on the same. Only recently, the Indian Oil Corporation stopped supplying fuel to Jet Airways and pointed out the non-payment of emergency funds.

Heavy Discounts

Domestic airlines in the aviation industry have been religiously following a ‘low-cost model’. This model encourages airlines to offer heavy discounts on flight tickets in order to attract passengers from competitors. Jet Airways was deeply affected by this model which promoted volume-based sales. Their operational costs increased tremendously, especially for international routes. Some of the known airlines like IndiGo and Spice Jet have also implemented this model in their businesses.

Delay in Salaries

A few days ago, 14 flights were cancelled because pilots did not receive their salaries on time. From senior pilots to external vendors, every member of the airline has been facing continuous delay in payment of salaries. The airline had committed to clear pending dues last month but nothing has improved since then. Moreover, employees have started leaving the airline.

Other reasons include – reduced international flight operations; especially to Gulf countries (40 flights were cancelled in a week), sequential quarterly losses that left airline with no capital, providing premium services like food and entertainment for free, late arrivals and departures and non-payment of dues.

“It is a wake-up call for the aviation authorities to seriously ponder as to why India is emerging as a treacherous graveyard for Indian carriers. It is a reflection not only on the sub-optimal management of the operations by the owners of these carriers but also of the sheer neglect by the aviation mandarins of incessant pleas from the industry to introduce sensible & reasonable taxation & tariff policies as well as other expenses charged by the airports,” commented Ajay Bodke, chief executive officer of Prabhudas Lilladher, in an article in the Economic Times.