On Wednesday, April 17, debt-laden Jet Airways announced that it is temporarily shutting down because it is unable to secure emergency funding from any source, including the lenders. The airline has suspended both, domestic and international flights.
Jet Airways CEO Vinay Dube said, “With deep sadness and a heavy heart we would like to share that, effective immediately, we will be suspending all our domestic and international flight operations.”
Late night, Jet Airways CEO Vinay Dube said that the lenders led by State Bank of India (SBI) will not infuse the airline with additional cash to keep the airline afloat.
The lending consortium is currently in the process of vetting bidders who submitted EoIs, indicating they want to takeover Jet. However, no official decision on the airline’s financial future has been taken yet.
Hence, Jet has temporarily shut down all operations to avoid becoming more indebted to the Indian Oil Company (IOC) and other service partners.
“Since no emergency funding from the lenders or any other source of funding was forthcoming, it would therefore not have been possible for us to pay for fuel or other critical services to keep the operations going… A decision like this is never easy to make”, said Dube.
History of Jet
Jet Airways has been the country’s largest and long-serving airline ever since it took off 27 years ago in 1992. At its peak, Jet operated 650 flights a day.
In 1994, the company was the first Indian airline to operate a fleet of Boeing 737-400 aircraft. It also won the coveted Air Transport World Award in 2001 and TTG Travel Award in 2002.
By 2008, the airline was operating two non-stop international flights between Mumbai and London, Chennai and Toronto, Dubai and Delhi and Mumbai, and a daily Mumbai-Shanghai-San Francisco flight. It was the first Indian airline to fly in China.
It was also the only airline to fly between Mumbai and Colombo, Kathmandu, and Hong Kong. Prior to its downfall, Jet was the country’s largest full-service carrier.
Many people on Twitter have expressed their disappointment at the news of Jet’s shutdown. Some say they grew up with the airline or took their first flight with it.
Problems with Indian aviation
Jet’s trajectory almost mimics that of Kingfisher, another airline with a turbulent financial past that ultimately rested its wings.
Former founder of Kingfisher is at the centre of controversy for fraud and defaulting on loans worth thousands of crore. He is currently involved in extradition proceedings in London.
However, beyond mismanagement, there are several issues that plague the aviation industry.
Despite aircraft increasing in size and passenger count, their yield suffers because of fluctuating fuel prices.
Almost 40% of an airline’s expenses are related to fuel expenses. So, when oil prices rise, the revenue of an airline decreases swiftly.
India is also the world’s largest consumer of oil and even increased its oil important by 4.37 million barrels per day.
In May last year, Dube said that Jet’s financial performance was negatively impacted by an increase in fuel prices.
Another issue is the depreciating rupee.
As Indian airlines fly to overseas destination, they must pay rent, maintenance fees, and refuelling costs to international airports. If the rupee falls in value, those expenses increase as well because payments are made in the dollar.
A third problem is a price war. No Indian airline owns enough of the market share to unilaterally raise prices without losing customers. So, each airline competes with the other to offer the best price, making yields flatline.
What’s next for the airline
Jet’s 22,000 strong staff—16,000 direct and 6,000 contractual- is staring unemployment in the face. Many of them looked teary-eyed as they protested with signboards against the airline’s mismanagement in Delhi and Mumbai.
All India Jet Airways Officers & Staff Association (AIJAOSA) wrote a letter to Prime Minister Modi asking him to intervene and resolve the crisis. The Finance and Civil Aviation Ministries are also copied on the letter.
“We sincerely appeal to you at this hour of crisis and request your urgent intervention to define a blueprint of revival and consolidation thereby avoiding loss of employment and critical damage to the aviation industry of India”, wrote President of AIJAOSA Kiran Pawaskar.
The airline’s staff has also taken to Twitter under the #SaveJetAirways hashtag to voice their concerns and attract the attention of high-profile politicians,
Jet pilot Gaurav Sharma said, “We salaried people pay fully and correctly. Don’t snatch our bread nd butter. #SaveJetAirways We will pay more taxes. Why are we suffering? #noJob #novote”.
Many employees have also said that they will not vote for the BJP because they’re suffering from unemployment. Another pilot, Tapesh Kumar made a video appealing to the government to take action. He explained that Jet’s staff will now struggle to support their families.
India’s job crisis has been a contentious issue this election season, as the BJP government has been accused of burying a report that showed unemployment levels at a 45-year-high in recent times.
Dube’s statement does not address the future of its employees at all.
These employees have not been paid their salary in months—partially or in full. Concerns about Jet’s financial stability became serious when it asked employees to take a 25% cut in their fees. Later, the airline managed to pay only 80% of its employees.
Jet has cancelled all its flights, with immediate effect.
Customers with bookings in the future will be informed of their cancellations via text message, call or email. Those with current travel plans with Jet will be refunded.
The airline also said that “essential services” for customers will be operational until further notice.
“We know that India is better off with a flying Jet Airways, and so do our potential investors. With a smile on our face and pride in our hearts, we have become the flag-bearer of warm Indian hospitality the world over”, said Dube leaving hope for Jet’s recovery.
The airline will now wait till the lenders vet the bidders.
Rhea Arora is a Staff Writer at Qrius
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