Jet Airways Failure-Things That Went Wrong

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Jet Airways Failure
Jet Airways Failure

Jet airways failure has gained a lot of popularity recently, and all for the wrong reasons. Quite recently, it failed to gain emergency funding from all its lenders and is almost on the verge of shutting down. One fine Wednesday it grounded 20,000 of its flights leaving the future of the pilots and crew uncertain. Here is a breakdown of a few things that went wrong for one of the most successful airlines we saw:

The most popular Failure of this decade in aviation after kingfisher airlines Failure is the Jet Airways failure.
  1. Tracing Back to 2006, Purchase Of Air Sahara
  2. The founder of Jet airways Naresh goyal did not pay heed to his professional advisors when he purchased Air Sahara on a higher price than he should have. These planes were later rebranded as JetLite(a subsidiary) but still didn’t give a huge ROI because of the fierce competition from budget airlines. Later, the merger with its own subsidiary was cancelled by the government, leading to a further loss, 3 years after the proposal, which further lead to the Jet Airways Failure

  3. The Budget Airline Trio
  4. The three budget airlines in the aviation industry have taken it by storm namely SpiceJet, IndiGo, GoAir. Since, their unmatched airfares and services pulled customers away from Jet Airways which did not take them seriously and instead focused only on corporate customers.

  5. Management Style
  6. The management style was never transparent which led to a confusion for both the customers and the investors, so, when the time came for the emergency funding, there was no support. Since, there was no concrete corporate model within Jet Airways. The management for the budget flying and the full-service carrier was both headed by a single person, which should have been headed by full-fledged teams for a smooth operation. Here’s what we have learned from it, a strong management could have avoided the jet airways failure.

  7. Bad Investments leading To Bad Debts
  8. A continuum of bad investments like Air Sahara that was purchased in $500 million cash wrote off its entire investment in 2015-2016, led to the company into debts. A major point that needs to be noticed is that all the airlines depend on crude oil prices, the high prices and with the Indian Rupee hitting its all-time low, led to huge losses and thus more debts, Meanwhile, IndiGo too had its share of losses but it had earned enough to sustain a quarter of losses but Jet had nothing but a load of debts with itself.

  9. The Taking Over
  10. The major turning point was Naresh Goyal’s failure to find a strategic investor to pump money into Airline which extended the losses and thus the jet airways failure, contributing to the financial predicament it finds itself in now. Etihad airways made a smart decision of not increasing its stake as the airline was already on the helm and the talks at the end of 2017 with Steel Giant TATA didn’t go as desired and thus the Single authoritarian leader Mr. Goyal was forced to give up control of Jet last month as part of a debt resolution deal that saw a consortium of lenders led by the State Bank of India.

  11. Carelessness By Crew
  12. The cabin crew forgot to turn the internal pressure control systems as a result 30 passengers suffered nose and ear bleeding in the Mumbai-Jaipur flight.

    The Timeline of Bad Decisions

    March 2018 Jet Airways reports a loss of Rs1,036 crore in the Jan-March quarter  as revenue declines and costs increase significantly. The company defers the March salaries  of some employees citing “circumstances beyond its control.”
    April 2018 Bows out of bidding for Air India citing the complex process.
    May 2018 The government refuses to approve Jet’s merger with its subsidiary JetLite, nearly three years after the proposal was made.
    June 2018 Jet announces new check-in baggage norms. The 15kg of free check-in luggage for economy class will have to be in one bag. Business class passengers can carry 30kg in two bags.
    August 2018 Considers a 25% pay cut for employees.
    August 2018 Indefinitely defers announcement of financial results for the April-June quarter of financial year 2019.
    August 2018 On Aug. 12, the Directorate General of Civil Aviation announces an audit to assess Jet’s financial health. State Bank of India asks the firm to provide enough collateral for emergency funding.
    August 2018 On Aug. 27, the company announces losses of Rs1,323 crore for the April-June 2018 period.
    September 2018 On Sep.19, the income-tax department conducts surveys in the company’s Mumbai and Delhi offices over allegations of financial misappropriation.
    September 2018 The next day (Sep. 20), around 30 passengers on a Jet Airways flight from Mumbai to Jaipur suffer nose and ear bleeding after the cabin crew forgets to activate the internal pressure control. India’s civil aviation minister Suresh Prabhu orders a safety audit of all airlines and airports.

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