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18 April, 2019 00:00 00 AM
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5 things that went wrong for India’s Jet Airways

AFP, Mumbai
5 things that went wrong for India’s Jet Airways
In this file photo taken on March 25 Jet Airways aircraft are seen parked at Chattrapati Shivaji International Airport in Mumbai. India's Jet Airways was teetering on the brink of collapse yesterday, operating just five planes, with lenders yet to release emergency funds to keep the debt-saddled carrier flying. AFP photo

India's Jet Airways was teetering on the brink of collapse yesterday, operating just five planes and waiting for lenders to release emergency funds to keep the debt-saddled carrier flying.

Airfares on rival carriers have soared and Air France and KLM are operating additional flights to Mumbai to accommodate passengers affected by Jet's decision to cancel international flights.

As the airline seeks an immediate injection of four billion rupees ($57.5 million) to continue its few remaining services, the news agency takes a look at where it all went wrong for Jet.

Many aviation experts believe the start of Jet's financial troubles can be traced back to the 2006 purchase of Air Sahara for $500 million in cash.

Founder Naresh Goyal reportedly ignored the advice of professional associates who said he was paying too much. Market reaction to the deal was also decidedly mixed.

The budget carrier was rebranded "JetLite" but it haemorrhaged money and in 2015, Jet wrote off its entire investment.

"The acquisition is still a millstone around the company's neck," Devesh Agarwal, editor of the Bangalore Aviation website, told the news agency.

India's aviation sector is fiercely competitive and

Jet has taken a battering from a number of hugely

successful low-cost airlines, including IndiGo, SpiceJet and GoAir.

Experts said the people running Jet failed to take the trio seriously when they were founded between 2005 and 2006, offering cut-price fares and previously unserved routes.

"They were essentially assumed to be fringe players by the Jet management," industry analyst Amrit Pandurangi told the news agency.

"Jet always catered to corporates and failed to recognise that low-cost carriers were attracting customers who were price sensitive," he added.

Experts put a lot of the blame on Goyal's management style.

They say his decision to have a single management team, headed by himself, running all Jet's operations was a crucial mistake.

Analysts say 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.

Goyal has also been 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 particularly sensitive to fluctuations in global crude prices because the Asian giant is a major importer of oil.

When the rupee is weak, which it has often been over the past year or so, fuel -- the biggest cost burden for airlines -- becomes more expensive.

 

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Editor : M. Shamsur Rahman

Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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