Sunday, June 23, 2019

Jet Airways succumbs to race to bottom in India's skies

Mumbai: Jet Airways has officially entered bankruptcy proceedings after years of failing to beat low-cost rivals on price or to offer enough added value in its services to justify higher fares.

But the Mumbai-based carrier's fall from grace is a sign of bigger problems in India's air travel industry, where cutthroat competition is squeezing airlines tighter despite a surge in passenger numbers.

India's National Company Law Tribunal on Thursday admitted an insolvency petition filed by Jet Airways' creditors. It told the carrier to submit a rehabilitation plan within 90 days.

"I feel sad and deeply distressed mainly for our loyal employees who have waited months, and were anxiously and hopefully awaiting a positive outcome to the Bank-Led Resolution Plan," said Jet Airways founder Naresh Goyal, who stepped down as chairman in March.

The airline is believed to face 84 billion rupees ($1.21 billion) in debt. While companies are usually given 180 days to come up with a rehabilitation plan, the court pushed for a quicker timeline, calling the case a matter of "national importance."

The creditors, which took control of Jet Airways in March, had previously hoped to find a sponsor for the airline's turnaround. But no good candidates arose. They decided not to extend further lending when cash ran out, grounding all flights in mid-April.

They now plan to sell either the company or its assets in order to recoup their losses. But there is not much left for them to unload, with thousands of pilots defecting to rivals and the majority of the 120-plane fleet having been repossessed.

India is one of the world's fastest-growing markets for air travel. The number of passengers on domestic flights jumped 19% to 139 million in 2018, double what it was four years earlier. Yet Jet Airways still failed, due to an overambitious expansion plan and competition from low-cost carriers.

Jet Airways launched in 1993 as India's first private-sector airline. It wrestled market share away from state-run players with its relatively new planes and on-time flights. It flew nearly 20% of all domestic passengers in 2015, becoming India's second-largest carrier over Air India.

But the company only booked a net profit twice in the 10 years through March 2018 as it invested heavily in new routes and more frequent service.
22/06/19 Nikkei Asian Review
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