Why is Jet Airways in the loss despite the boom in air travel in India? - letsdiskuss
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Medha Kapoor

B.A. (Journalism & Mass Communication) | Posted on | News-Current-Topics


Why is Jet Airways in the loss despite the boom in air travel in India?


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India is one of the fastest growing air travel markets in the world. But this doesn’t necessarily mean that airlines are making big money. The carriers reported a combined loss of up to $1.7 billion in FY19. Although that gap might get a reverse in FY20 with an expected loss between $550 million and $700 million (thanks to lower fuel price), things still aren’t looking any better for the industry players.

Talking about Jet Airways, it is one of the worst hits…

• Jet Airways has reported losses in 8 out of the last 10 years.
• Its shares have fallen from 22.5 percent in 2015 to 15.5 percent in 2018.
• In 2013, the airline was close to collapse until Abu Dhabi's Etihad Airways purchased 24 percent of its stake.

Letsdiskuss (Courtesy: Live Hindustan)

These facts very well sum up the turbulent journey that Jet Airways has had in the past decade.

At the moment, it has got a brief relief with state-run banks, led by SBI, purchasing its temporary stake in Jet, infusing about $216 million. But still, lessors such Avolon and Aircastle remain skeptical of the airline's growth; they have asked Indian aviation regulator to de-register 18 planes, some of which, reportedly, may go to Spicejet.


With all these developments, Jet chairman Naresh Goyal and his wife Anita Goyal has been forced to resign from the board. While many believe that both have lost their touch, let’s not forget these two started Jet in 1993 at a time when state-run Air India was dominating the market. They envisioned the rise of private carriers, paving way for other companies.

jet-airways-in-loss-letsdiskuss (Courtesy: Twitter)

Nonetheless.

One of the biggest reasons why Jet Airways had such a hard fall is tough competition from low-cost airlines like IndiGo and SpiceJet. While Jet was busy doing its regular business, these new carriers managed to take away its large market share through cheap fares.

Over the course, IndiGo and SpiceJet continued wooing the middle-class population for who air travel in India was still new. They established their names in the industry rather swiftly. Already late to the party, Jet decided to compete with them by lowering its own fares. The biggest mistake it made was to actually lower the prices without lowering its operational expenses. This pushed the airline into a big debt that now stands at $1.2 billion.

Aside from competition, high fuel price and big taxes compounded its loss further.

Also, one cannot argue for many thoughtless decisions that Jet's board made over the years, including buying Sahara for $206 million in 2007 -- an airline that didn't fit Jet's culture.

Indeed, in India, being competitive in pricing is very important. However, that's one of the many business strategies. Instead of jumping in to compete with low-cost carriers like IndiGo and SpiceJet, it could have maintained its exclusivity by targeting the high and middle-high class travelers. Like Emirates and Lufthansa.

jet-airways-in-loss-letsdiskuss (Courtesy: Free Press Journal)

In short, Jet Airways is there where it is right now because of its own bad decisions.

Fortunately, with more boom in air travel in India, the aviation industry is expected to grow. So, hopefully, Jet Airways get on the right track in the coming months and years.


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