What we’ll cover:

• Origin & Expansion of Jet

• From a smooth take off to a crash landing
• Challenges & Reasons behind Downfall
• This Is not the First Time.
• Mistakes
• Current Situation
 Origin of Jet airways
Jet Airways was incorporated as an air taxi operator on 1st April 1992.
Naresh Goyal and his wife Anita started Jet Airways in 1993.

It began international operations to Sri Lanka in March 2004.

International expansion: The carrier ordered 22 wide-body aircraft for delivery
over about 18 months, starting in 2006, depleting cash, an executive associated
with the airlines told Bussiness Standard.
 JET AIRWAYS EXPANSION
Air Sahara acquisition:
• In 2006 Jet announced its business strategy of acquiring Air Sahara an all-cash
deal and finally in 2007, took over Air Sahara for US$210 million.
• Air Sahara renamed as Jetlite.
Competition:
• The experts say the Jet management underestimated low-cost carriers like
IndiGo, SpiceJet and GoAir.
Etihad stake:
• In 2013, Jet was close to running out of cash, but survived collapse when Abu
Dhabi's Etihad Airways bought a 24 percent stake in the Indian airline.
Luxury service, low cost
From A Smooth Take Off To A Crash Landing
• In 2018,Jet Airways Was alleged of faulty loan repayment to banks and vendors.
In March, a whopping Rs.8414 crore.
• Jet cancelled 300 planes.
• Left with not many choices to revive the company,Naresh Goyal sought financial
help from Etihad Airways.
 Hunting for a solution

Entrepreneur Naresh Goyal is trying to rope in Etihad Airways, which

owns 24 per cent stake in Jet Airways, to buy more shares in the
company and offer some relief.
 Non-payment of staff salary
• The airline has even failed to pay salary to several members of their staff,
including senior pilots and even external vendors.
• The news of Jet Airways telling its employees to take salaries cuts has sent
shock waves in the sector.
• Jet Airways has also let go of at least 36 employees in a bid to cut costs.
Contd.
• Jet has informed its employees that the airline would not be able to operate
beyond 60 days unless cost-cutting measures, which include pay cuts, are put in
place, according to ET report that cited sources. Jet Airways has informed its
employees that up to 25% cut in their salaries because of increasing in
operations cost.
• Salary cuts are in the range of 5% (for those earning Rs 12 lakh annually) to
25% (for those earning Rs 1 crore and above) starting this month.
• Jet said senior management had already taken pay cuts.
Profitability Challanges
• Profitability challenges After two consecutive years of profits in fiscal
2016 and 2017, Jet incurred losses of about Rs 76 crore during FY2018.
• Industry analysts say it is likely to report a loss of Rs 1,000 crore in the
first quarter of the current fiscal. Jet is not the only carrier that has
witnessed a decline in profitability.
• IndiGo, India’s largest carrier by passengers flown, has reported a 91%
drop in profits for the first quarter of this fiscal.
• The bottom line of airlines is getting hit due to high cost but lower yields
in India, which is the largest growing market in terms of passenger
growth on the globe. Analysts say fall in yields is due to airlines not
being able to charge a premium on fares booked at the last minute.
Three consecutive quarterly losses
• The premium airline suffered three back-to-back quarterly losses starting from
the January-March quarter when it reported a massive loss of Rs 1,045 crore;
then in the April-June quarter when it reported a loss of Rs 1,323 crore.
• However, trouble for the airline intensified in the July-September quarter when
it encountered a loss of Rs 1297.5 crore. At one point of time, it was reported
that the airline does not have the capital to operate beyond 60 days.
 Reduced operations
• Jet Airways is expected stop flight operations to Gulf routes due to its badly-hit
finances.
• Flight operations to Dubai, Abu Dhabi, Doha and Muscat including Doha-
Kochi, Abu Dhabi-Mangalore, Mangalore-Dubai, Delhi-Muscat and Abu-
Dhabi-Lucknow will be affected.
• The airline is expected to cancel at least 40 flights a week in nine Gulf country
routes.
 Low-cost model
• The low-cost model, followed by most airlines (domestic) in India, is one of the
biggest factors behind rising operational costs in the aviation sector. Jet Airways
is one of those players which has been deeply hurt by the model followed by
budget airlines such as IndiGo and SpiceJet.
• It involves offering heavy discounts on flight tickets to attract more passengers.
In a nutshell, it is a business strategy which is based on volume-based sales.
• Each airline looking to snatch customers away from competitors, even at the
cost of offering tickets at dirt cheap prices.
• Many experts including airline executives have critcised the low-cost model.
 Problems
POOR MANAGEMENT :
• One of the main reason for the failure of JET AIRWAYS was,
Mr Naresh Goyal management style.
• Industrial expert said that , there was single management for all
JET AIRWAYS operation which was being headed by Mr Goyal itself.
• Expert said that , to run such huge operations of aviation giant like JET
AIRWAYS was a crucial mistake itself.
 PROBLEMS :
COSTLY PURCHASE :
• Many aviation expert believe that the start of JET financial troubles started
back in 2006 when they purchased
• “AIR SAHARA” for 500 millon in cash .
• MR.GOYAL’S professional associate has adviced him that he is paying
too much but Mr.GOYAL still went on paying 500 million in cash and
purchasing “ AIR SAHARA ’’.
• The budget carrier was futher renamed as “JET LITE ’’
which turnout be unsuccessful deal and JET AIRWAYS has written off this
investments.
 PROBLEMS :
Failure To Attract Investors :
• Aviation Analyst said , MR.GOYAL’s failure to find strategic
investor to pump money in JET AIRWAYS has lead to the
airline failure .

• TATA GROUP once showed the urge to acquire JET

AIRWAY’S but MR.GOYAL had rejected the deal and now
JET AIRWAY’S is a part of history .
 Not the first time
 Jet Airways faced Two Major Industrial Crisis during its Lifetime:

1. 1900 Employees Sacked and then Reinstated in 2008.

2. The Pilots Revolt 2009.
1900 Employees Sacked & then
Reinstated
• Buying Sahara was Big Strategic Mistake by Jet Airways.
• Jet sacked 1900 cabin crew members in October 2008.
• Switch to leaner business models and cost – optimize business
operation.
• Backslash from Employees, Government, Political parties and
Regulatory bodies.
Cont.
• Goyal claimed that he was not aware of these.
• Reinstates employees day after a very dramatic press
conference. `
Cont.

Jet Airways employee protest 2008

But in 2009, Naresh Goyal asked the world to hold his glass once
more.
The Pilots Revolt 2009
• Formation of NAG on 24th July, 2009.
• Two pilots were sacked.
• “I will not hesitate to close down the airline. I have no disagreement
with pilots. However, I cannot tolerate any breach of the basic
principle of discipline.”
• 14 days of strike caused loss of Rs.15 Cr per day.
Mistakes
• Merger : Sahara was acquired by jet airways for $500 million which was
not an appropriate price of the company .

• Sole decision making : Naresh Goyal had the policy of taking decision
single handedly without taking advice from the industrial experts.

• Drowning in debts : They kept on taking debts and spending more than
their earnings.

• Full service airline : Operating as a full service in India is not an easy

task.
• Rebranding Sahara : Jet airways rebranded Sahara airlines as Jet Lite .

• Rivolt by pilots : The firing and rehiring had created insecurity among
employees.

• Rising of cost : The rates of the tickets could not be increased because of
the low cost models.

• Depreciation of Rupee : The value of rupee took a dip globally and that as
well affected the airline industry.

• The final breakdown : Jet was operating in loss of crores quarter after
quarter and soon it couldn’t even able to pay the crew and pilots.
The Current Situation of Jet Airways
• lessors began withdrawing their aircraft from Jet Airways’ fleet.
• Indian Oil Corporation refused to serve any fuel to airlines‘ aircraft
• Dec 2018, airline operated 123 aircraft, On 18th Apr, 2019 departed
its last flight.
• Riddled with massive debts and no emergency funds.
• Airline has virtually no assets and value crumbles by the day.
• Jet Airways‘ staff are the saving grace here.
 Cont.
• only Etihad Airways have submitted a proper bid.
• The Abu Dhabi based carrier is looking to remain a minority
stakeholder.
• August 10 was deadline to submit Expression of Interest
• Three suitors emerged, But only Volcan Investments confirmed
interest.
• IndiGo took over 30% of Jet’s domestic slots.
• SpiceJet acquired 63 domestic and international slots of Jet.
• Last date to submit resolution plans or bid is Sep 12.
When What
Jet Airways reports a loss of Rs1,036 crore in the Jan-March quarter as revenue
March 2018 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.
The government refuses to approve Jet’s merger with its subsidiary JetLite, nearly
May 2018 three years after the proposal was made.
Jet announces new check-in baggage norms. The 15kg of free check-in luggage for
June 2018 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.
Indefinitely defers announcement of financial results for the April-June quarter of
August 2018 financial year 2019.
On Aug. 12, the Directorate General of Civil Aviation announces an audit to assess
August 2018 Jet’s financial health. State Bank of India asks the firm to provide enough collateral
for emergency funding.
On Aug. 27, the company announces losses of Rs1,323 crore for the April-June
August 2018 2018 period.
On Sep.19, the income-tax department conducts surveys in the company’s
September 2018 Mumbai and Delhi offices over allegations of financial misappropriation.
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
September 2018 internal pressure control. India’s civil aviation minister Suresh Prabhu orders a
safety audit of all airlines and airports.
sources
www.aerotime.aero/rytis.beresnevicius/23007-jet-airways-crisis-
explained
www.indiatoday.in/business/story/jet-airways-financial-crunch-key
https://www.ndtv.com/india-news/jet-airways-crisis
Moneycontrol.com