This is right time to discuss this point, as recently we have seen the recent closure of one of the oldest Mumbai Based aviation company Jet Airways. So, let’s look this topic by taking Jet’s example. This company was launched in 90’s with a prime target of to serve the rich and semi rich people only. Hence, cost was not the constraint and focus were to serve a world class comfort to the passengers. Company was doing well with elite class passengers, because revenue was high against the cost.
Till 2005, Jet airways solely managed to do well in domestic and international. But, in after years many airline companies grew up to give competition i.e. Jet Lite. Jet Airways was is generally known for its high-ticket pricing because they provide meals commentary in the ticket pricing. To meet the competitors, Jet airways increased their domestic flights which went to over 109 flights for domestic and 30 for international.
Jet airway’s market strategy went in to miserable situation when, they started struggling to maintain the ticket cost in the competition environment and at the same time up not to compromise with class. This became a milestone for them to make their first loss deal. And from their the loss got increased every year and by 2018 the annual loss was recorded with over INR 1000 cr.
A rocket which goes up speedily come back speedily too, this statement goes well in case of Jet airways and now the founder Mr. Naresh Goyal have given up in front of board. The planes have been parked, the staff salaries are stuck, the fuel dues are pending. In short, the sky has met the ground and the airways have been landed.
Now let’s look it at from after impacts and chances to recover: –
- Current debts– Over 9000 crores are due to pay to lenders, salaries, fuel cost etc. The planes are parked in the airport which will also be charged as high parking cost.
- Customers refund– Refund of customers who have booked the tickets before closure- The refunds are in the dark for those customers who had planned their vacations or business trips on higher tickets costs with Jet Airways, now they don’t have any clue till date that how would they get their money back.
- Bank loans are to be paid back– SBI is one of the major contributors for Jet’s finances and since the Airline is non-operational then it will be a question mark for SBI to see the chances of recovery.
- Investor – It will be great for the airlines if some volunteer investors come forward and show some interest in buying Jet airways with all the lender’s due to make again Jet airways touch the sky. There is a light news that some investor from UK have shown an outskirt interest to fund the company.
- Govt’s involvement liaise up with banking partners– Govt. can initiate some bail out package, with the help to involve all board members and banking partners so that the company can again be operational until taking some concrete business decisions for future.
The above points are really a big question mark for now and it becomes so painful for those employees who have been not paid from long time and they are clue less on their pending salaries. Their monthly domestic dues, home rents, EMIs, utility bills are hanging on their neck. It will be interesting to see that in this election season, whether govt. will interfere to do some thig for the employees or not.
In this situation, another thing comes in the mind that such big financial crises cannot born overnight. It is strange, despite of regular annual financial report submissions, many brains working at the backend, banks are monitoring, other survey agencies are awake, the aviation ministry is there still such shut downs gets happened in India which drains out many employee’s career, their dreams, their kids future and many more things.
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