Friday, April 16, 2021

Two years after Jet Airways’ suspension: Here's what led to airline suspending ops

On April 17, 2019, cash-strapped Jet Airways, once a pioneer of India’s private aviation industry, announced that it was temporarily shutting down its operations after it failed to secure emergency funding from any source, including lenders. The carrier was forced to suspend both domestic as well as international flights.

The economic reforms under the PV Narasimha Rao-led Congress government in the early 1990s opened various avenues for private entities and it marked the entry of Jet into the aviation sector. Led by Naresh Goyal, Jet Airways was one of the first few private players in the sector and had its maiden flight from Mumbai to Ahmedabad in 1993. At its peak, considered one of the premium air carriers, the airline operated 650 flights a day.

But what led to the grounding of one of the path-breaking carriers in the private aviation sector?

Jet's story is pretty similar to that of Kingfisher Airlines when it comes to how it crumbled and struggled to keep itself afloat. A week before the temporary shutdown of the carrier, an industry executive, who was then associated with Jet, told Reuters that the problems began after the airline embarked on an aggressive international expansion plan.

Starting in 2006, Jet ordered 22 wide-body aircraft for delivery over about 18 months, the executive said. This was followed by the purchase of Sahara Airlines for 14.5 billion rupees ($209 million) in 2007. Experts say the Sahara's ageing fleet did not fit Jet's corporate culture.

And in the middle of all this, another private player, a low-cost carrier, IndiGo entered the market and chipped away Jet and Kingfisher's market share.

The trouble peaked in 2013 first when the airline ran out of cash and was on the verge of collapse. But Abu Dhabi-based Etihad Airways came to its rescue, buying a 24 percent stake in the Indian airline.

While the collapse was evaded, the competition intensified. To compete with the new players in the market, Jet, too, reduced its fares drastically but continued with its expensive services. High fuel prices and hefty taxes only compounded the spending issues at Jet Airways, industry executives said. The losses led to the accumulation of huge debts, which kept growing over the past several years, and the airline started defaulting on loans.

In April 2019, the crisis reached a point when the airlines ran out of funds to pay its staff and keep itself afloat.

Two years since the temporary shut down of the airline, a revival plan is said to be afoot, and we may get to see the grounded carrier fly in the sky soon. This comes as the airline's new investors, a consortium of UK-based Kalrock Capital and U.A.E.-based entrepreneur, Murari Lal Jalan, await clearances from the National Company Law Tribunal (NCLT).

16/04/21 CNBC TV18

To Read the News in full at Source, Click the Headline


Post a Comment