The clipped wings

'Jet Airways'
 About Jet Airways
 Jet Airways was incorporated as an air taxi operator in April 1992
 It started domestic commercial airline operations in May 1993
 It began international operations in March 2004
 In 2005 Jet Airways raised 1899 crores from IPO, a huge success for the
company
 The company had more than 30,000 employees
 It operated a fleet of 85 aircrafts over 400 daily flights to 65 destinations
worldwide
 It was India's second largest airline a while ago
 In April 2007, Jet airways acquired Air Sahara for US$ 340 million in all-cash deal
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 About Jet Airways
 In October 2008 Jet announced an alliance with rival Kingfisher regarding
code-sharing on domestic and international flights, joint fuel management,
common ground handling and utilization of crew etc.
 In October 2008 laid off 1900 employees-largest lay-off in the history of Indian
aviation. Later on all the employees were reinstated .
 Company Slogan - “The Joy of Flying”
 Awards & Achievements - Best Domestic Airline, India's Airlines, Service
Excellence award, India's most respected co in the travel and food sector, Best
Cargo airline of North Asia etc.

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 Service line of Jet Airways
 In Flight services – First class, Premiere Class, Economy class
 On Ground services Check in options – SMS check in, tele check in, web check
in, check in while walk in.
 Convenience and Safety - Towels, Pillows, Blankets, Reading Material, First Aid,
Smoke detector, Bassinets, Child care, Life jackets & seat cushion.
 Entertainment- Jet screen, Movies, TV program, Music, in-flight communicator,
online magazines etc. Jet Wings (in-flight magazine), Jet Boutique.

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 Industry Overview
 Indian Aviation industry is one of the most fastest growing aviation industry in the
world.
 India has 464 airports and airstrips, of which 125 airports are owned by Airport
Authority of India (AAI)
 Passenger traffic in India stood at 316.51 mn during April 2018 - Feb 2019. Out of
which domestic passenger traffic stood at 252.92 mn while international traffic
stood at 63.59 mn.
 India is expected to become third largest aviation market in terms of aviation by
2024
 India has amongst the most liberal Foreign Direct Investment (FDI) policies in
aviation sector across the world. 5
 Industry Overview(contd.)

 In December 2018, Indian aviation completed 52 consecutive months of double

digit growth
 Total passenger traffic to, from and within India, during Apr-Nov 2018 grew by
around 15% year on year as compared to around 6% globally
 India’s aviation industry is largely untapped with huge growth opportunities,
considering that air transport is still expensive for majority of the country’s
population, of which nearly 40 per cent is the upwardly mobile middle class
 AAI is going to invest Rs 15,000 crore (US$ 2.32 billion) in 2018-19 for expanding
existing terminals and constructing 15 new ones.

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 The Fall
 Market share fell from 22.6% in 2010 to 17.8% in 2017
 Due to SpiceJet and Indigo, the company was forced to follow the suit of
lowering the ticket fares
 November 2018 - Jet Airways reported negative financial outlook due to
increased losses
 March 2019 - One-fourth of company’s aircraft were grounded due to unpaid
lease rents , Chairman steps down
 April 2019 - IOC stops supplying fuel citing non-payment of dues, suspension of
all international and eastern India-bound flights

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 The Fall (contd.)
 April 17,2019 - Lenders rejected emergency funding of Rs. 4 Billion, all flights
operations and membership in International Air Transport Association (IATA)
suspended
 June 17, 2019 - Got no acceptable offers from Etihad Airways and Hinduja Group
 Jet Airways decided to refer the company to NCLT for bankruptcy proceedings with
a debt of $1.2 billion
 As of July 11, 2019, a total of 209 slots vacated by company lying unused at 31
airports

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 Drop in Share Price in Last 2 years

 Continuous drop in the value of share from Jan ‘18 till date
 Value dropped from Rs 806 per share to Rs 16 per share
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 Effects of the Jet Crisis
 Loss of jobs: Every employee on the rolls of Jet Airways also costs five others
indirectly involved in the value chain.The crisis in Jet Airways has put around
20,000 jobs at stake
 Source of Income: Airports Authority of India, GMR Infrastructure Ltd and GVK
Group stand to lose airport landing and parking charges and other rental
revenue from Jet Airways
 Loss for other groups: Airport operators, fuel suppliers and other vendors have
lost a big customer with Jet Airways' fall
 Lenders are sceptical: Lenders are unsure if the funds pumped into Jet Airways
at this stage could be recovered at a later date
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 Effects of the Jet Crisis(Cont.)
 Costlier Ticket Prices: Jet Crisis has crippled the aviation market and made
ticket prices costlier, particularly those booked closer to the travel date . This
makes flying less appealing for the price-conscious customer
 Travel Plans: Surging fares will impact travel plans
 Loss to banks: Jet’s total debt was Rs 5,285 crore, with trade payables of
another Rs 6,400 crore at 31 March 2018. Banks and other creditors have little
chance of recovering their dues as Jet being a services company, has less
physical assets
 Airline Industry Growth: The increase in the airfare and decline in the available
seats for sale also stopped the growth of aviation market.The Current yearly
growth was just 0.14% compared to the 18.6% for the previous year.According
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to analysts, traffic growth is likely to further lower during the current year
 Controversies that surrounded

● Service from Newark to Brussels

01 Trademark Infringement ●
●
Opposed by CEO of US based Jet Airways
Alleged trademark infringement

● A Company contractor was implicated in foiled

terror plots
02 Safety and Customer Care ●
●
Clearance was delayed to fly to US
Bhopal-Mumbai flight was held up by large
group of passengers
● Implicated in Gupta family controversy in
South Africa by a lawmaker
Corruption and Links
03 to underworld
● Leaked information that RAW & IB have found
financial transaction of airlines with
underworld

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 What went wrong?
 Costly Purchase:
Purchase of Air Sahara for $500 million in cash in the year 2006
 Budget Airlines:
Jet always catered to corporates and failed to recognise that low-cost carriers
(Indigo, Spicejet and GoAir) were attracting customers who were price sensitive.
 Poor Management:
 Jet lacked a concrete business model and fiddled with it often, which
confused both investors and customers
 Mr. Goyal’s decision to have a single management team, headed by
himself, running all Jet’s operations was a crucial mistake

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 What went wrong? (contd.)

 Fluctuating Crude:
Soaring oil costs and the Indian rupee hitting record lows affected all the Indian
carriers. Though others were able to handle it, Jet failed to manage its balance
sheet getting caught in these cyclical changes in industry
 Failure to attract investors:
Talk with Tata failed to go anywhere, while Etihad Airways refused to increase its
stake because Mr.Goyal was at the helm.

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How could Jet Airways have saved itself ?
 Focus on international routes : Due to a lack of aircraft capacity, Jet Airways
had been forced to only fly domestic routes. They were previously very popular
with local experts travelling home as well as tourists arriving to explore the
country.
 Canceling 737 MAX orders : They should have cancelled the 737 MAX orders
not just because they are under crisis, but they are over-leveraged and could
use this value to actually clear some debts.
 Raise prices : To beat the competition, Jet Airways should have priced itself out
of the competitors reach and have provided value to premium customers. They
could have tied up with hotels and provided combo deals to customers
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References
 https://www.jetairways.com/insolvencyproceedings/Documents/CompanyInfor
mation(Teaser)-20July2019.pdf
 https://economictimes.indiatimes.com/industry/transportation/airlines-/-
aviation/the-jet-case-study-what-exactly-happens-when-an-airline-
drowns/articleshow/69068386.cms
 https://www.investindia.gov.in/aviation
 https://www.ibef.org/industry/indian-aviation.aspx
 https://www.thehindu.com/business/Industry/five-things-that-went-wrong-for-
jet-airways/article26863021.ece
 https://en.wikipedia.org/wiki/Jet_Airways
 https://www.livemint.com/companies/news/jet-airways-crisis-set-to-reset-india-
s-aviation-industry-1555561602346.html

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Thank you

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