Reasons for downfall of Jet Airways

Introduction- Jet airways

Jet airways, once the star of Indian aviation is flying its last flight today. The airlines has been crippled by huge revenue loss and reducing market share. I hope, as your reading through this article, deals are being made to revive the airline. In the airline sector, jet airways used to be a sign of hospitality, luxury, punctuality and customer service.

Today close to 20000 employees are stranded and jobless. Though Jet airways was running 35-40 flights, but the total shutdown will affect the valuation by potential investors. Yesterday even the rumours of a shutdown, reduced the share value of Jet airways by 20%.

Lets now look into a few reasons for the shutdown of jet airways:

Price sensitivity

The arrival of budget carriers like spiceJet, indigo and air-asia with low- cost, no-frills and on time flights led Jet to give tickets on discounts. The price sensitive passenger refuses to pay premium prices for inflight meals or onboard entertainment which jet airways offers at premium prices. We have also seen the downfall of Kingfisher earlier this decade. Cut throat competition from other airlines in terms of price reduced customer acquisition of jet.

Twin impact: Fuel prices & crashing rupee

In 2018, the 7.3% jump in jet fuel and crashing rupee was devastating for not only Jet Airways but also the other airlines. The aircraft lease rentals, maintenance contracts are in US dollar, which adds on to the trouble. Jet fuel prices for domestic flights are already the highest in India globally,” said an airline official.

The airlines was forced to add on to the fuel surcharge which further increased the price of the tickets. People were forced to look for cheaper options.

Debts

Jet has been in loss for the last 11 years other than 2016 and 2017. But after these 2 years, Jet again incurred losses of about Rs 767 crore in FY2018. Presently Jet has 1.2 billion USD in debts and it also owes to its employees and suppliers. With dying revenue and all the increasing debts, they found it better to shut operations down for the time being.

Poor performance in share market

Jet’s stock has gone down by 66 per cent this year, making it the worst performing airline stock in Asia Pacific. On the other hand, India’s Sensex index gained 11 per cent.

“We need to recover the money and value we have lost,” Jet Airways Chairman Naresh Goyal said at the airline’s annual general meeting . “I feel guilty, I feel embarrassed that we have not been able to perform, especially with shareholders who stood with us.”

Lack of Investors or Funding

Finally with all the problems and the debts, the back-out of banks and lenders to fund the sinking airlines led to a complete halt in operations. The airlines needed a 400 crore loan to stay afloat.

“Late last night, Jet was informed by State Bank of India, on behalf of the consortium of Indian lenders, that they are unable to consider its request for critical interim funding. Since no emergency funding is forthcoming, the airline will not be able to pay for fuel or other critical services to keep the operations going,” said a statement from Jet Airways.

Conclusion

Finally, as I’m about to finish this article the last flight of jet airways must have landed at Amritsar. I am personally very sad about the closure of one of the Indian brands that provided world class service. My prayers go out to all the employees and I desperately hope we get to travel by the amazing jet airways again.

Heres the last letter from Jet Airways

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