The airlines which once ruled the skies is now in troubled waters due to its financial crisis. Jet Airways, will now be operated by its lenders as its founder, Naresh Goyal, along-with his wife Anita Goyal, have stepped down.
The case is the rarest of the rare, as earlier when companies faced financial crisis, they had to often shutdown. But for the very first time, the company will continue to operate despite owing Rs 8,000 crores to its lenders which includes the State Bank of India. The SBI- led management are in search of a new financial investor, so that the debt-ridden airlines could be revived again.
SBI’s Chairman, Rajnish Kumar, convinced Goyal to step down and decided to take over the reins of the company in a bid to save the sinking ship. For over five months the SBI led lenders have worked hard to save the airlines from a collapse.
Let us very briefly look into the timeline of events, right from its in inception, that led to the decline of one of the mightiest airlines of the Indian subcontinent.
1992: Started on 1st April 1992, the company was an LLC (Limited Liability Company). Its market share was 6.6% at that time.
1994: The airlines carried 1.7 million passengers and went on to become the second largest airline of the nation.
1995: As a major achievement, the airline was granted a scheduled airline status on 14th of January.
1996-1997: The number of passengers carried by the airlines increased to a whooping 2.7 million and the market share increased from 6% to 20%.
2001-2002: Airline suffers losses from the first time since its inception.
2004: Post the Government’s nod to allow private airlines for overseas flights, Jet launches its first International flight from Chennai to Colombo. On the 28th of December the company gets listed in BSE and becomes a public company.
2007: In a major expansion move the company acquires Air Sahara for Rs 14.5 Billion and renames it as JetLite.
2009: The airways launch Jet Konnect, another low-cost brand on profitable short-haul routes with higher passenger load factors.
2010: Jet becomes the largest airlines with a 22.6% market share.
2012: Post Kingfisher’s demise, Jet Airways merges Jet Konnect and JetLite and starts offering business class seats.
2013: 24% stake of airlines sold to Etihad Airways.
2014: Jet Konnect merges with Jet Airways in order to re-position itself as a uniform full-service operator thereby becoming the third full-service airline in India besides Air India and Vistara.
The airlines was at its peak in the year 2016 when it became the second largest airline after Indigo with a 21.2% market share.
2018 and present
May 2018: The year wasn’t good for Jet Airways as in the month of May the shares of the company fell by 12.3% due to a decline in company’s net profit for the month of March.
August 2018: The salaries of employees
September 2018: For flights operating post 25th of September, the airlines stops offering free meals to its economy class passengers.
October-November 2018: Talks of Tata group buying a stake in Jet Airlines emerges with Tata planning to merge Jet and Vistara, but all in vain.
- Sacking employees was seen as another move taken by the airlines to curb its financial losses.
- The December of 2017, for Jet, ended with a profit of Rs 165.25 crore but one year later, for December 2018, it was reported that a loss of Rs 587.77 crores had been incurred.
- A total of 13 planes of the airways were grounded, 4 in January and 9 in February due to non- payment of the rent with only 54 aircrafts remaining operational.
- Decision of reviving the airlines, made by the board, led to a change the management in order to maintain the competition in the industry along with the welfare of the customers.
- The board approves a bank led resolution plan thereby making the SBI led lenders going on to become the largest shareholders in the airline with the condition that Goyal would step down as the chairman and a board member.
The chronology of events boiled down to Naresh Goyal and wife Anita Goyal stepping down on 25th of March 2019 and reducing their stake in the company to 25.5 percent from 51 percent.
Possible Reasons for the fallout
- Three consecutive quarterly losses in the year 2018 starting from the month of January.
- The rising cost of Aviation Turbine Fuel, the fuel used in air crafts, is credited to be a major reason for the company’s fallout because Jet operates on International air routes as well.
- 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.
But now since the company is taken over by its lenders and SBI being one of them, possibilities are there that company will revive and will be restored to its full might.