Jet Airways has officially put a stop its operations making way for Air France and KLM to soar their prices.
Jet’s decision to cancel international flights has made Air France and KLM to operate additional flights to Mumbai to accommodate the passengers affected by this decision.
While everybody is left wondering as to what really went wrong with Jet Airways here are the top 5 reasons for its fall from the grace.
Troubles for Jet began in the year of 2006 when it purchased Air Sahara for $500 million in cash. While many had then suggested Naresh Goyal against the deal as they believed the price was too high, he ignored the advice and went ahead with his decision.
The budget carrier was rebranded “JetLite”, but it hemorrhaged money and in 2015, Jet wrote off its entire investment.
As for Devesh Agarwal, editor of Bangalore Aviation website, “The acquisition is still a millstone around the company’s neck.”
The aviation sector is highly competitive and Jet failed to compete against the low-cost airlines like IndiGo, SpiceJet and GoAir.
Experts said the people running Jet failed to take the trio seriously and underestimated the power of budget-friendly airlines when they were founded between 2005 and 2006, offering cut-price fares and previously unserved routes.
Industry Analyst Amrit Pandurangi told AFP, “They were essentially assumed to be fringe players by the Jet management.” He added, “Jet always catered to corporates and failed to recognize that low-cost carriers were attracting customers who were price sensitive.”
One major flaw that the experts pointed was Mr. Goyal’s management style. As per them the decision to have a single management team, headed by himself and running all Jet’s operations was a crucial mistake.
They believe that he should have had one team running the full-service carrier and another running the budget flyer.
Jet lacked a concrete business model and fiddled with it often, which confused investors, (and) passengers alike,” said Agarwal, who believes the company’s decisions lacked transparency.
Mr. Goyal was also accused of making bad investments and failing to address the company’s deteriorating financial predicament while borrowing heavily.
“Simply put, they spent more than they earned and kept accruing debts,” added Agarwal.
All of India’s carriers are highly sensitive to fluctuations in global crude prices as the Asian giant continues to be a major importer of oil.
The rupee rate which was weak all of the past year made fuel even a bigger cost burden on the airlines.
While no Indian carrier was spared due to the extreme cost fluctuations, Jet surely suffered the most. Also, IndiGo and SpiceJet reported massive losses but as per the analysts, their books were resilient enough to weather the quarterly losses.
“Jet Airways failed to manage its balance sheets and was caught out by these cyclical changes in the industry,” Mumbai-based economist Ashutosh Datar told AFP.
The investment was one of the biggest reasons for Jet’s fall. Failure to find a strategic investor to pump money into the company led to Jet’s end facing the ailment of the financial crisis.
Attempts with Tata and Etihad Airways also failed thus leading the 69-year-old to give up his control on Jet last month as a part of a debt resolution deal that saw a consortium of lenders led by the State Bank of India take over the airline.
With responsibility now in the hands of SBI, we hope they find a buyer soon to avoid any more inconvenience to the consumers and employees who are now left with no jobs.