Monday, June 17, 2019

Will the Jet Airways be ever airborne again?

It was on April 17 that Jet Airways had run out of funds, and its operations had come to a grinding halt. Jet, a full-service airline, was competing domestically head-on with highly agile and viciously competitive low-cost carriers (LCCs) which had mastered the art of cost control. The cost per seat-km was much higher for Jet than for any of its LCC competitors. Indeed, these were about the very highest in the Indian airline industry. On the other hand, the salaries that the Jet staff enjoyed were also the highest in the Indian airline industry. That was not good economics. The airline had been going steadily downhill for some time and, when the consortium of lenders declined to give an emergency funding of Rs 983 crore it had “temporarily” suspended operations.
Jet Airways seemed to have undertaken some innovative financial practices. As a result, the Serious Fraud Investigation Office of the Corporate Affairs Ministry, the Enforcement Directorate of the Finance Ministry, the Economic Investigation Office of the Ministry of Company Affairs, the Registrar of Companies, the Income Tax Department’s Investigation Wing, among others, talk of “irregularities”, “discrepancies”, “siphoning off of money”. “fund diversions” and the like – a measure of the airline’s steadily increasing desperation to stay afloat.
There was nothing unexpected about the end outcome. Jet had been defaulting on payments for months before it shut down. Among the lenders, only HDFC was smart enough to place the airline’s Mumbai office on the block – at a reserve price of Rs 245 crore. They may be among the very few organisations to recover at least a part of their money loaned to Jet. Among others, the Airports Authority of India (AAI) had sealed Jet’s offices at four domestic airports – but could do little more.
16/06/19 FreePressJournal
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