Jet Airways: A Journey from Riches to Rags

    More than a year has gone by since the airline carrier that popularized air travel for middle-class Indian families by bringing airline prices down drastically, shut its operations down. In this article we’re going to explore how the largest airline in India with a market share of 22.5%, met its end.

    Jet Airways, an airline operator, incorporated in 1992, was a private company funded by Naresh Goyal (60%), Gulf Air (20%) and Kuwait Airways (20%) (though, both of the latter two international airlines had to exit in 1997 after a government ordinance and Naresh Goyal purchased the remaining 40% stock). Despite being incorporated in 1992, it did not start operations till more than a year later, making its first flight from Bombay to Ahmedabad, and by the end of the year, 1993, it had already carried more than fifty thousand passengers across 12 destinations.

    Soon, the company was big enough to purchase another airline, Air Sahara, in the year 2007, renaming it to JetLite and effectively making it a low-cost carrier. Throughout the upcoming years Jet Airways continued to succeed, acquiring more airlines, entering into mergers with some of the key players like Kingfisher, and winning multiple ‘Best Airline’ Awards. But, their success was short-lived.

    In November 2018, nearly 25 years after its first flight, Jet Airways’ unstable finances became common knowledge. The situation worsened within weeks and eventually after almost half a year of struggle, the company was deemed insolvent and thus, had to shut down its operations.

    A lot of people hold its decision to purchase Air Sahara, back in 2007, for ₹ 1,450 crores, accountable for its fall. It is said that this deal gave the company endless financial, legal and human resource problems. It is also said that Mr. Goyal was one with a jovial and compassionate nature and therefore, more often than not, his reluctance in laying employees off proved to be negative for the business.

    Another reason that’s cited as a major one in the failure of Jet Airways was its founders’ desire for control. Naresh Goyal and his wife, Anita Goyal, the power couple, simply hated the idea of losing control of their company and made a series of bad decisions to avoid that. In 2011-12, when Jet was suffering from its first ever financial setback, Goyal sold 24% of his stock to Etihad Airways and soon saw himself lose control over the company he built. He took charge again and dismissed the professional team, sent in by Etihad to professionalise Jet’s operations, which is still considered as a move that acted against the interests of the company. This was just one incident among a multitude of others.

    As of now, Indian Oil Corporation has stopped supplying fuel to the airline, citing non-payment of dues as the emergency funds have still not been credited. The airline has suspended all flight operations, due to lenders rejecting Rs 4 billion of emergency funding and its membership in the International Air Transport Association was also suspended. On 17 June, after getting no acceptable offers from Etihad Airways and Hinduja Group, lenders to Jet Airways decided to refer the company to National Company Law Tribunal (NCLT) for bankruptcy proceedings with debt of $1.2 billion.

    The story of Jet’s rise and subsequent fall has a lot of takeaways. We can observe the actions of the founders and learn from the mistakes they made. One of the lessons that I personally like is, sometimes letting go is better than trying to hold on. Had Naresh kept the interests of his company in mind and provided some control to qualified individuals, Jet Airways might still have been around.

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