The government’s intervention to bail out Jet Airways will amount to rigging the competition in the aviation sector, say experts.
Jet Airways, India’s second-largest airline, plunged into a deeper crisis after its pilots, on Tuesday, gave an ultimatum to go on strike if not paid their salaries by April 1.
Over 20,000 Jet employees haven’t been paid for over three months as the company is cash-strapped due to various reasons, prominent among them is bad financial management.
At present, out of 119 of its aircraft, 47 have been grounded, which led to the cancellation of over 250 flights every day.
So what has brought the company to the brink of an existential crisis?
A section of experts blame the rising fuel prices, which increased the company’s operational costs more than its earnings, whereas others point towards the company’s bad financial planning.
Ramesh Dugar, a chartered accountant and a new entrant to the aviation sector, says that the cost of Jet Airways per seat/per km is about Rs 4.15, whereas it is charging about Rs 3.65 per seat/per km from fliers. “It’s a bad business model which has brought the airline to this mess,” Dugar who is not in favour of the government asking banks to bail out the company by infusing more money into it, told Outlook.
Sources in Jet say that they had to offer cheaper tickets to stay in competition with their rivals such as IndiGo and SpiceJet.
“Why should the government ask the banks to give public money to a company which has itself caused the financial mess?”, says an aviation expert requesting not to be quoted.
He draws a parallel saying the government’s financial support to Air India was one of the reasons why Kingfisher Airlines failed.
“With the government’s support, Air India offered cheaper tickets to fliers on those routes on which Kingfisher was its rival. While Air India rode on government’s money, Kingfisher went bust,” he told Outlook.
21/03/19 Jeevan Prakash Sharma/Outlook
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Jet Airways, India’s second-largest airline, plunged into a deeper crisis after its pilots, on Tuesday, gave an ultimatum to go on strike if not paid their salaries by April 1.
Over 20,000 Jet employees haven’t been paid for over three months as the company is cash-strapped due to various reasons, prominent among them is bad financial management.
At present, out of 119 of its aircraft, 47 have been grounded, which led to the cancellation of over 250 flights every day.
So what has brought the company to the brink of an existential crisis?
A section of experts blame the rising fuel prices, which increased the company’s operational costs more than its earnings, whereas others point towards the company’s bad financial planning.
Ramesh Dugar, a chartered accountant and a new entrant to the aviation sector, says that the cost of Jet Airways per seat/per km is about Rs 4.15, whereas it is charging about Rs 3.65 per seat/per km from fliers. “It’s a bad business model which has brought the airline to this mess,” Dugar who is not in favour of the government asking banks to bail out the company by infusing more money into it, told Outlook.
Sources in Jet say that they had to offer cheaper tickets to stay in competition with their rivals such as IndiGo and SpiceJet.
“Why should the government ask the banks to give public money to a company which has itself caused the financial mess?”, says an aviation expert requesting not to be quoted.
He draws a parallel saying the government’s financial support to Air India was one of the reasons why Kingfisher Airlines failed.
“With the government’s support, Air India offered cheaper tickets to fliers on those routes on which Kingfisher was its rival. While Air India rode on government’s money, Kingfisher went bust,” he told Outlook.
21/03/19 Jeevan Prakash Sharma/Outlook
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