Jet Airways was incorporated on 1st April 1992 as a private company with limited liability and commenced its operations as an air taxi operator in May 1993 with a fleet of just four leased Boeing 737 aircraft. The company became the first airline in India to run Boeing 737-400 aircraft in 1994. The company was granted as a scheduled airline service on 14th January 1995 and became a deemed public company on 1st July 1996.
It became a private company again in the year 2001. The company won many prestigious awards over the years such as the TTG travel award for the best airline. The biggest deal of the company was when it inked the deal with Etihad Airways, the national United Arab Emirates in June 2008. The company has enhanced its network connectivity in both domestic and international plateaus since then.
So, what can be the reason that such a big bird of the skies is on the verge to wound up today?
The following may be the reasons:
It can be traced back to the year 2006 when the airlines bought the Air Sahara for $500 million dollars in cash. Its founder Naresh Goyal then ignored the advice of its associates that the amount is too hefty to be paid for such a deal. The budget carrier was named as Jet Lite but it turned out to be a liability till 2005 and the airline wrote off its investment.
The airline is still suffering from this deal and the acquisition is still a milestone for the company.
Plus, the aviation industry of India is a fierce one and Jet has had a lot of competition from many low-cost profit-making airlines such as Indigo and SpiceJet. The main problem that Jet Airways faced was its top management including Goyal. The company’s decisions and investments lacked transparency. Also, they were spending more than what they earned which made them accrue huge debts.
When the Rupee started deteriorating in the Forex Market, the biggest cost incurring good for the airline sector i.e. Fuel went high on prices. All of this adversely affected the Indian aviation industry. Even SpiceJet and Indigo reported huge losses but their books had provisions for such weather in advance. Jet Airways could not do the same and got caught up in a cyclical chain of events. Moreover, the management was unable to find an investor for pumping money into the airline to manage the losses and turn into a new leaf.
The 69-year-old Naresh Goyal was made to step down by a consortium of lenders led by the State Bank of India last month only.
Talking about the market conditions of Jet Airways, the stock prices have faltered to such an extent that speculators are predicting that this is the end of it and it cannot recover unless some miracle happens.
Now, following is the graph showing the shriveling stock prices of Jet Airways for the past 1 week from 11th April till 18th April 2019.
If you observe carefully;
the Airline saw a steep fall of about 30.28 percent yesterday i.e. 18th April because of the financial stress that the company was going through for the past one year, due to which they finally gave up and halted all its operations. The company which once had a fleet of 119 aircraft was left with a remaining of 4 functional ones which too struggled for fuel and other operational necessities. The company has a debt of around Rupees 8000 crores for which the bidders will have to offer bids by May 10th for acquisition.
With this the future of all the employees of Jet Airways is uncertain. The company currently has over 16000 employees on payroll and 6500 on contract.
The pilots of Jet Airways have not been receiving their salary since January. Even the ground and operations staff are unpaid for three months. The emergency funding request by Jet Airways has been denied by its lenders. Out of the 1400 pilots that Jet had, over 400 pilots have left their jobs and had joined rival companies in the past one month.
This will probably be the second time that India will witness the shutdown of such an aviation giant since 2012 when Kingfisher Airlines led by Vijay Malaya faltered.
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