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MAY 2019


On the brink

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May 1st 2019

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It is often said the airline business is easy to enter and almost impossible to exit. Never has this been truer than in India in 2019. Read More » The Modi government has been trying, unsuccessfully, to get rid of government-owned Air India for years. More recently, it has been under pressure to save privately-owned and now grounded Jet Airways.

The government, in the throes of the longest election voting exercise in the world, appears prepared to stand aside as the former darling of Indian aviation mounts a last ditch effort for survival.

The odds are stacked against it. It has debts of US$1.2 billion and climbing, unhappy lessors, suppliers and lenders and a very wishy washy response from investors in assisting Jet’s return to the skies.

At the turn of the month, media reported the government was considering allocation of the airline’s foreign rights to fellow Indian carriers, failing Air India and LCCs IndiGo and SpiceJet. It was another blow to the airline’s chances of resuscitation and would not be encouraging news for potential buyers.

For months Etihad, which owns 24% of Jet, has been nominated by the media as the carrier’s White Knight yet there has been no definitive indication the loss-making carrier is making a deal to save Jet. Qatar Airways group CEO, Akbar Al Baker, visited Mumbai to stake out Jet but left empty-handed. Any rescue deal, if struck, would deliver a huge haircut to Jet’s creditors, principally its bank lenders.

Jet’s bleak future is a stark lesson for today’s airline industry. Full-service carriers that fail to meet the multiple challenges of the new economic age cannot expect investors to throw good money after bad. Jet’s possible demise should not surprise anyone.

In one of the fastest growing markets in the world, Jet continued to live in the past. In the last decade, it has misjudged the market and constantly changed its leadership. Most particularly, it failed to recognize the threat of India’s emerging LCCs to its business.

Ferocious and fruitless fare wars, the failure of its own LCC, India’s onerous fuel taxes and foreign exchange losses have not helped Jet as it struggled to keep flying.

The airline’s founder, Naresh Goyal, has been an industry icon, building Jet Airways into a full service international carrier within a decade of its launch. His March departure from the chairmanship of Jet was a sad end to a career of great achievement in aviation.

But like Pan Am decades ago and India’s Kingfisher Airlines in more recent times, Jet has no God given right to exist if those who manage it fail to adapt to the contemporary realities of running an airline. Sadly, Jet may be too far gone to be turned around.

Associate editor and chief correspondent
Orient Aviation Media Group

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