Case Study on Jet Airways
--Case Study on Jet Airways
Jet Airways (India) Ltd was an Indian international airlinebased in Mumbai, India which, on 17 April 2019, ceased all flight operations with its last revenue flight operated by a Jet Konnect Boeing 737 arriving into Mumbai on 17 April 2019. From the third quarter of 2010 onward, Jet Airways was the largest commercial passenger airline in India with a passenger market share of 22.6%. With its competitors, mainly SpiceJet and IndiGo, lowering ticket fares in the following years, it was forced to follow suit, hurting overall performance resulting in steep financial losses. It dropped to second place behind IndiGo in October 2017, with a passenger market share of 17.8%. The downward slide continued and resulted in bankruptcy. The airline was granted a scheduled airline status on 14 January 1995. In January 2006, Jet Airways announced its intention to acquire Air Sahara for US$500 million in an all-cash deal; however, the deal fell through in June 2006. On 12 April 2007, the deal was back on track with Jet Airways agreeing to pay US$200 million. In October 2008, Jet Airways entered into an alliance with rival Kingfisher Airlines for code-sharing on domestic and international flights, collaboration on frequent-flyer program and sharing crew and ground handling equipment. On 8 May 2009, Jet Airways launched another low-cost brand, Jet Konnect. In the third quarter of 2010, Jet Airways became the largest airline in India with a passenger market share of 22.6%. In 2013, the airline lowered prices and entered into a fare war with low-cost carriers IndiGo and SpiceJet
Jet Airways served 57 destinations including 37 domestic and 20 international destinations in 15 countries across Asia, Europe, North America and Middle East. The airline has its primary hub at Mumbai and secondary bases at Delhi and Bangalore. In March 2004, the airline introduced its first international destination, Colombo, with flights connecting to Chennai. London was the airline's first long-haul destination and was launched in 2005. Since 2007, Jet Airways has had a scissors hub at Brussels Airport for onward transatlantic
connections to North America, which was replaced by Amsterdam Schiphol Airport from 27 March 2016. In 2008, the airline was forced to discontinue international routes because these attracted losses due to global economic downturn; it terminated services to San Francisco and Shanghai.
There are many reasons for the failure of Jet Airways, and mentioned below are some of them: 1. Merger: The merger between Sahara Airlines and Jet Airways was a mistake on Jet Airways's part. Sahara was acquired by Jet Airways for $500 million which was way above what the airline was actually worth. 2. Rebranding Sahara Airlines: Jet Airways renamed Sahara Airways as JetLite. Sahara at the time was a powerhouse with its name on every Indian's tongue. The rebranding cost Jet Airways a major chunk of its customers; flyers who were attracted towards the Sahara brand image couldn't resonate with JetLite. 3. Mismanagement: Every company and organization rests on the abilities of its management board; there are no second opinions to this school of thought. Naresh Goyal, the founder of Jet Airways, decided to become a one-man army for Jet Airways and did not hire a sound management committee to assist him in running the airline. Insiders often talk about his poor financial acumen. He relied on a single management team for handling all the operations related to Jet. Understanding that specialized teams are needed to run different departments is no rocket science. And when you acquire one more airline, you can't rely on your existing management board that's already burdened to take up additional responsibilities! 4. Full-service airline: Full service airlines offer passengers the choice of economy or business class travel and premium economy and first class on some flights. The company was operating as a full-service airline. Operating as a full-service airline in India is not an easy task. One needs formidable financial support and customer relationships. Catering to the wealthy, the middle class, and the lower sections of the Indian society requires strategy and operational excellence beyond imagination. That is why most of the company’s focus on the middle-class segment and keep the prices as low as possible. Jet Airways was biting off more than it could chew. 5. Drowning in Debts: Jet Airways was never good with money. It kept on incurring debts and spending more than its revenue. The employees were paid lavishly when compared to the industry standards. For the sake of providing comfort and luxury, the Naresh Goyal backed airline compromised with finances.
Conclusion: Jet Airways is on the verge of bankruptcy. Many entrepreneurs have come forward to employ people who lost their jobs due to the Jet Airways crisis. Many have been absorbed by competitors such as SpiceJet. If someone ultimately buys Jet Airways, there's hope for the ex-employees of the bankrupt airline to get their dues. As of now, the hope of revival of Jet Airways is getting thinner and thinner. As reported in March of 2020, the bidders who issued Express of Interest( EoI) to buy Jet Airways have not submitted any resolution plan as per the requirements, yet. As confirmed, the grounded airline did not find any buyer till March 9, 2020. Again, till March 2020, around 20,000 claims were made on Jet Airways which amounted to around Rs. 37,000 crore. Of this, while workmen and employees have claimed over Rs. 14000 crore, creditors are claiming over Rs 11,000 crore from Jet Airways. Looking at the current scenario, it seems that the Jet Airways' saga has almost come to an end. However, the Indian Government's role is pivotal in deciding the course this crisis ultimately takes.