CASE STUDY ON JET AIRWAYS

The Jet Airways case study is now so popular that it is mentioned in almost
every Business School's curriculum due to the airline's unimaginable debacle.
Founder Naresh Goyal is being investigated by the Enforcement Directorate
(ED) and a large number of ex-employees still remain jobless after the airline
shut down its operations in April 2019. As per April 2020 reports, around 4000
employees are still on the rolls of Jet Airways, and these employees are
facing tough times in the absence of any regular source of income.

Jet Airways' shutdown is often considered as one of the biggest

organizational failures to have occurred in India. A lesson for many, this post
covers the journey of Jet Airways and digs deep into the reasons for its failure.

September 13, 2021 - Jet Airways' shares surged by 5%. The defunct airline
company is likely to resume its domestic flights after March 2022.

February 2021 - Jet Airways is looking to start operations with 25 new

aircrafts in the first phase and the base will be in Delhi-
NCR. (Source: businessworld)

December 2020 - As per the official statement released by Jet Airways, if

everything goes as per the resolution plan and the consortium receives the
NCLT and Regulatory approvals, then Jet Airways will start its operations
by summer of 2021.

October 18, 2020 - The lenders of Jet Airways approved the resolution plan
submitted by UK-based Kalrock Capital and UAE-based entrepreneur Murari
Lal Jalan to revive and operate the airline.

May 25, 2019 - The government temporarily reallocated Jet’s slots to keep a
check on reducing capacity in the sector due to a significant drop in the
carrier’s flights. (Source: Livemint)

According to some sources, IndiGo and SpiceJet have been allocated 130
slots each, Vistara 110, GoAir 52, Air Asia 42, and Air India 24 slots at Indian
airports from Jet’s quota. (Source: Livemint)

Jet Airways founder Naresh Goyal and his wife Anita were stopped from
leaving India by immigration authorities at Mumbai airport. They were
offloaded from a Dubai-bound Emirates flight, which was called back after it
had reached the taxiway at Mumbai airport. (Source: InShorts)

Jet Airways shut down its operations temporarily on 17 April 2019. The last
flight was from Amritsar to Mumbai The shutting down of the company
affected 20,000 employees and more than 60,000 people indirectly. The
company is reportedly in a debt of a billion dollars. NAG (National Aviator’s
Guild) appealed to the PMO (Prime Minister’s office) and then-Civil Aviation
Minister Suresh Prabhu to help the company and its employees .

The government on the other hand reportedly asked the banks to save the
company without pushing it to bankruptcy. With unemployment being a major
electoral issue for the government, an addition of 20000 to the list of jobless
Indians will only give more substance to the opposition. The Government is
therefore pulling out all the stops to prevent Jet Airway's insolvency.

Jet Airways History:-

Naresh Goyal started Jet Airways with 4 leased Boeing 737 aircraft in 1993.
The airline was the paragon of success for domestic carriers in India. There
were rumblings of trouble brewing within Jet Airways in August of 2018 when
the company deferred the second quarter results of that year.

The government watchdogs got a sniff of discrepancies in the airline's

financials. In the same month, the DJCA (Directorate General of Civil Aviation)
conducted a financial audit of Jet Airways. It was based on the reasoning that
the deferment of employees’ salaries ought to affect their morale and attitude.

The same month, Jet Airways posted a loss of INR 1323 crores.

In September of 2018, the Income Tax department surveyed the Delhi and
Mumbai offices of Jet Airways. The company was then alleged for financial
misappropriation.

Reasons Behind Jet Airways Bankruptcy:-

Merger

The merger between Sahara Airlines and Jet Airways was a mistake on Jet
Airways' part. Sahara was acquired by Jet Airways for $500 million which was
way above what the airline was actually worth.

Mismanagement:-
Every company and organization rests on the abilities of its management
board; there are no second opinions to this school of thought. Naresh ghoyal
he founder of Jet Airways, decided to become a one-man army for Jet
Airways and did not hire a sound management committee to assist him in
running the airline. Insiders often talk about his poor financial acumen. He
relied on a single management team for handling all the operations related to
Jet. Understanding that specialized teams are needed to run different
departments is no rocket science. And when you acquire one more airline,
you can't rely on your existing management board that's already burdened to
take up additional responsibilities
Full-Service Airline:-
Full-service airlines offer passengers the choices of economy, business
class, premium economy, and first class on their flights. The company was
operating as a full-service airline. Operating as a full-service airline in India is
not an easy task. One needs formidable financial support and customer
relationships. Catering to the wealthy, the middle class, and the lower sections
of the Indian society requires strategy and operational excellence beyond
imagination. That is why most of the companies focus on the middle-class
segment and keep the prices as low as possible. Jet Airways was biting off
more than it could chew.

Drowning in Debt:-
Jet Airways was never good with money. It kept on incurring debt and
spending more than its revenue. The employees were paid lavishly when
compared to the industry standards. For the sake of providing comfort and
luxury, the Naresh Goyal-backed airline compromised with finances.

Buying Proposals:-
Jason Unsworth, a BritishhEntrepreneur and CEO of Atmosphere
Intercontinental Airline, expressed his interest in buying a controlling stake in
Jet Airways.

However, Jason was told by Jet Airways to sit down with SBI Caps Limited,
which was leading the resolution plan for the carrier.

Jason claims to have written to Jet Airways’ lenders but never receiving any
reply in return. He later wrote to Jet Airways’ CEO, Vinay Dube, about the
proposal to purchase a stake in the airline. Jason said he was provided with
contacts of SBI to get in touch with. He is also in talks with other Indian
entrepreneurs and investors for financing his bid for a controlling stake in Jet
Airways.

The Possible Revival Of Jet Airways In 2021

As per the official statement released by Jet Airways, if everything goes as per
the resolution plan and the consortium receives the NCLT and Regulatory
approvals, then Jet Airways will start its operations by the summer of
2021.

The new promoters of Jet Airways (Murari Lal Jalan and Kalrock Capital)
considered starting a new airline but ultimately decided to go with the Jet
brand; mainly because of its brand value and customer connects. As per the
resolution plan, Jet Airways intends to operate all of its historic domestic
slots in India and restart international operations.

On 18 October 2020, the lenders of Jet Airways approved the resolution plan
submitted by UK-based Kalrock Capital and UAE-based entrepreneur Murari
Lal Jalan to revive and operate Jet Airways.

The new management of the grounded airline has reached out to top
executives in the aviation sector to run daily operations. Apart from passenger
operations, the new management will focus on the cargo operations to
improve the airline.

“The Consortium's vision is to regain lost ground, set new benchmarks for the
airline industry with the tag of being the best corporate full-service airline
operating on domestic and international routes. The Jet 2.0 hubs will remain
Delhi, Mumbai, and Bengaluru like before. The revival plan proposes to
support Tier 2 and Tier 3 cities by creating sub-hubs in such cities," the official
statement noted.

The new management’s vision for Jet 2.0 is inclined towards increasing the
cargo services to include dedicated freighter service (An undeserved market
Indian carrier). "Given, India’s position as a leading center for global vaccine
manufacture, cargo services have never been more required," the statement
added.

“Jet Airways has been a brand with a glorious history of over 25 years, and it
is the vision of the consortium to put Jet Airways back in the skies at the
earliest opportunity. We aim to re-energize the brand by infusing energy,
warmth, and vibrancy into it while making it bigger and better," said Manoj
Narender Madnani, board member of the Jalan Kalrock consortium.

Jet Airways is looking to resume its domestic flights in the first quarter of
the next year, after March 2022 in the light of new promoters for the defunct
airline. The shares of the airline surged by 5% on September 13,
2021, bringing in a fresh wave of hope for the airline. Jet Airways is currently
headed by Murari Lal Jalan, a businessman based in the United Arab
Emirates, and the London-based Kalrock Capital, the new owners of the
airline company.

Jet Airways has been grounded since April 2019 and is now looking for a
resolution to its bankruptcy. Boeing B777-300(ER), one of Jet Airways'
airplanes that was seized in the Netherlands due to unpaid dues has not been
sold off. Punjab National Bank, one of the lenders of Jet Airways that had
approved of the resolution plan earlier has now appealed against the same for
which it has approached the National Company Law Appellate Tribunal
(NCLAT).
Conclusion:-
As reported in March of 2020, the bidders who issued Express of Interest
(EoI) to buy Jet Airways did not submit any resolution plan adhering to the
requirements. As confirmed, the grounded airline did not find any buyer till 9
March 2020.

By March 2020, around 20,000 claims were made on Jet Airways which
amounted to around INR 37,000 crores. Of this, while workmen and
employees have claimed over INR 14000 crores, creditors are claiming over
INR 11,000 crores from Jet Airways.

Looking at the current scenario, it does not seem like the Jet Airways saga
has come to an end. The Indian Government's role is pivotal in deciding the
course this crisis ultimately takes.

Jet Airways was on the verge of bankruptcy. Many entrepreneurs have come
forward to employ people who lost their jobs due to the Jet Airways crisis.
Many have been absorbed by competitors such as SpiceJet. If someone
ultimately buys Jet Airways, there's hope for the ex-employees of the bankrupt
airline to get their dues. And it appears that the revival of Jet Airways is
possible with the emergence of new promoters and a renewed management
committee.