Jet Airways

What has happened to Jet Airways ?

It seems that India’s oldest privately owned airline is on the verge of total collapse, and it’s flight operations are at the minimum level. As per latest position of yesterday, only 5 of its aircrafts were in operation yesterday. The domestic side of  Mumbai’s T2 terminal looks deserted, as Jet was operating maximum flights from there, even more than that of Air India’s domestic division. Slowly the shops and eateries inside departure area in T2 terminal  are closing their shutters. The problem with Jet is that it simply does not have the enough working capital to operate . It is having debt of more than Billion dollars and also lost money for the last four quarters.

Problem of the Jet airways is that the state owned banks are the biggest creditors and they are unwilling to throw more money at the airlines without a clear revival plan. This is definitely big change from the past, when they kept on supporting Kingfisher airlines, long after it seemed rational to do the same.

Even Jet’s founder, Naresh Goyal, is no longer bidding for the bank’s stake in Airline,  because he is having fear that other shareholders may not play along. Too often , in the past ,Indian cash starved companies have managed to  get their debt re structure, with state owned banks taking a little beating, and while the promoters who control crucial amounts of equity maintain control of the company. This procedure, which was happening earlier was an unhealthy lack of accountability. The Indian tax payers should be happy that it is not happening in this case, because of the present govt’s guidelines to Reserve bank and other banks.

Jet has about 23,000 employees, and it means that fate of 23,000 families hinges on Jet wing & prayer. For more than 50% of the employees, Jet is the only employer they have worked for. The employees have not received their salaries and allowances for months. Then there are more than 6000 contract workers, who are employed by 16 Contractors across the country, and these workers are doing the work as cleaners, loaders & utility staff.

Jet’s luck has run out because, in the past it usually seemed  to benefit from govt’s intervention, that drove many of its full service competitors out of the market. Jet is the only survivor from the first round of private Indian airlines that started flying in early 1990s, and which in Indian jargon means that you have managed the govt much better than your competitors.

The problem for Jet is, if you are competing against low cost airlines that still somehow provide equivalent services in economy class – not to mention a full service airline, like Air India, which is state owned and can absorb whatever losses it wants- that means it is very difficult to dodge your fate all the times.

Now if Jet collapses, its demise should be seen as another sign that sectors in even an increasingly prosperous India may not look like their counterparts elsewhere. Perhaps low cost carriers may slowly eat away at full services across the world.

If Jet survives, it is in the interests, not just of creditors, but its employees and Indian travellers. Then it should do so without help from the  govt and without pressure on the state owned banks. It should not be bought by the govt’s own investment fund, the taxpayers already have one debt ridden airlines..

Now look into the future Indian aviation scenario, If Jet goes, and Air India is already on the verge of collapse if periodically not funded  by govt, then the world’s fastest growing aviation market will have just one full service Airline, a collaboration between Singapore Airlines & Tata group. Tatas have long been obsessed with aviation, as they feel they were wrongly thrown out of Air India.  But in today’s scenario it is not sure whether Tata will be able to run a profitable airline business.

There is distinct possibility that in future, there will not be a single full service airline in Indian domestic sector. Indian low cost airlines are good by world standards. They are quite ethical about not hiding extra fees. But it sounds so odd that country which is soon going to be fifth largest economy, will not able to support  a healthy aviation industry in future, having both low cost & full service airlines.

So let us wait and watch.

Awaiting your comments/feed backs/views.

Anil Malik

Mumbai, India

17^th Apr 2019.