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In pictures: What has gone wrong with India’s Jet Airways?
Here’s a look at where it all went wrong for the Etihad-backed troubled Indian carrier Jet Airways, the country’s oldest surviving private airline.
Costly purchase: 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.
Budget airlines: 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.
Poor management: 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. Goyal has also been accused of making bad investments and failing to address the company’s deteriorating financial predicament while borrowing heavily.
Fluctuating crude: 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. Soaring oil costs and the Indian rupee hitting record lows last year affected all Indian carriers. IndiGo and SpiceJet reported massive losses but analysts say their books were resilient enough to weather the quarterly losses. Jet’s, however, were saddled with debts.
Failure to attract investors: Aviation analysts say Goyal’s failure to find a strategic investor to pump money into Jet extended the airline’s losses, contributing to the financial predicament it finds itself in today. Talks at the end of last year with tea-to-steel conglomerate Tata failed to go anywhere, while Etihad Airways reportedly refused to increase its stake because Goyal was at the helm.
