Every question that has been bothering you about the rise and fall of the airlines...answered
Jet Airways, the premium aviation company founded 26 years ago by Naresh Goyal, is today on the verge of bankruptcy. the company has grounded all its 119 aircraft and suspended all domestic and international operations. Its 14,500 employees, unpaid for the past three months, are staring at an uncertain future and the lenders are clueless about recovering over Rs. 8,000 crore given in separate installments to meet the airline’s operational costs. the State Bank of India-led consortium of banks, which took control of the carrier, couldn’t get a potential investor to pump in fresh money to start operations. We piece together the complex Jet story, with its many twists and turns.
Why did it go bust
There are many reasons. Some experts believe that Jet’s acquisition of Air Sahara in April 2007 for Rs 1,450 crore was the beginning of its downfall. Not only was the acquisition expensive, Jet Lite, the rebranded Air Sahara, suffered losses in the first year of its operations. In the financial year 2007-08, the company showed a loss of over Rs. 600 crore for the first time in the company’s history.
Rising fuel costs and ruthless competition, mainly from low-cost carriers, continued to deteriorate Jet’s financial health as it had no option but to offer seats below operational costs. Reports also suggest that Naresh Goyal’s autocratic functioning resulted in some unrealistic business decisions. For instance, Jet paid 12 per cent commission to its agents against the sale of tickets while the global practice was of less than 2 per cent.
Who can come to rescue
This story is from the May 06, 2019 edition of Outlook.
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This story is from the May 06, 2019 edition of Outlook.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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