For the very first time in 27 years, since its inception, Jet Airways has faced a complete shutdown. It comes as a shock to many. Even SBI’s decision of taking over the reins of the debt-ridden airlines, could not help much.
The flight from Amritsar to Mumbai, flight no S2 3502, was the last flight of Jet Airways. Ironically, it landed much before its scheduled arrival and post this Jet Airways was completely grounded. `
So, what could be the possible reason behind its shutdown? The refusal by the lenders for an immediate funding of Rs. 400 Crore forced the airlines to ground all its operations.
Obviously, this event triggered a lot of questions. The first and the foremost one is what about the staff who now have an uncertain future ahead? There are nearly 23000 Jet Airways staff members who have turned jobless post shutdown. Will the airways resume its operations ever? It is said that this shutdown is temporary and the lenders are hopeful of reviving the airlines post bidding. What about the unpaid salaries of the workers?
This event will have many consequences. Many of us are unaware of the fact that India, in 2015, was ranked 8th in the list that mentions the countries with highest number of air passengers. Since then, the number of passengers has obviously increased. Increased flight rates can be seen as a repercussion to the grounding. The country is now left with 10 scheduled airlines only.
It was in the year 2016 that Jet Airways was at its peak and had 21.2% market share. Therefore, a question arises as to what led to the fallout of the company within three years? The possible reasons could be:
- Although everything was going fine until 2017, the year 2018 turned out to be an unlucky year. Jet suffered three consecutive quarterly losses in the year 2018 starting from the month of January. This is possibly the prime reason that led to the grounding of Jet.
- Some of the flights of Jet Airways also flew overseas. The rising cost of Aviation Turbine Fuel, the fuel used in air crafts, is credited to be another reason for the company’s fallout.
- When someone sets up an airlines business, chances of airlines making profits are very less. Rising competition leads to low ticket costs which means that margins are less in this business.
- Payment is to be made to numerous stakeholders like lenders/ vendors/ employees/ government and it is difficult for a company to meet payment commitments in view of low profits.
- In a bid to woo customers, the company initiated a low-cost model which obviously didn’t match up to the amount that the airlines had to pay in the form of their employees’ salary or the rising cost of Aviation Turbine Fuel, leading to company’s fallout.
While Jet is the first case where there is a possibility of revival, our country has witnessed many airlines shutting down. So, let us just look at the airlines of India which have faced a complete shutdown.
The table below mentions that at least 64 airlines in India have shutdown till date.
|Serial Number||Airlines||Year Started||Shutdown Year|
|8||Air India Regional||2007||2017|
|14||Aryan Cargo Express||2005||2010|
|20||Crescent Air Cargo||2000||2006|
|21||Alliance Air (India)||1996||2007|
|22||Hinduja Cargo Services||1996||2000|
|36||Goa Way Aviation||1992||1993|
|43||Safari Airways (India)||1971||1977|
|44||Transportes Aéreos da Índia Portuguesa||1955||1961|
|45||Air India Cargo||1954||2012|
|51||Indian Overseas Airlines||1947||1950|
|52||Air Services of India||1946||1953|
|59||Himalayan Air Transport & Survey||1934||1935|
|60||Irawaddy Flotilla & Airways||1934||1939|
|62||Indian Transcontinental Airlines||1933||1948|
|63||Indian State Air Service||1929||1931|
|64||Indian National Airways||1925||1945|
To ensure the above number does not increase, it is expected that the government, the lenders and the other stakeholders devise policies to make airline operations a profitable business.