From Once Being The Largest Airline In India To Being On The Brink Of Bankruptcy, This Is The Sad Story Of Jet Airways

Cash strapped Jet Airways has announced temporary suspension of all operations after it failed to secure Rs 400 crore in emergency funding from the lenders. According to an official statement, the last flight will take off at 10:30 PM.

Jet Airways is staring at an imminent shutdown, which could be followed by insolvency, bringing an end to an episode in the Indian aviation history. The airline, which in its prime, flew 119 aircrafts was reduced to just five on its last day.

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What Jet Airways has been reduced to today is far from what it was during its heyday when it used to operate to 52 destinations across the world and was regarded as one of the best-managed airline operating in India.

Jet Airways

Jet Airways which was set up in 1991 and began operations two years later in 1993 as an air taxi service from Mumbai.

BCCL

Naresh Goyal, the founder of Jet Airways began his career as a ticketing agent for Lebanese International Airlines and later worked with a number of other international airlines before setting up his own firm. Like most of his compatriots, Goyal too took advantage of the open skies policy in the early 1990s and ventured into the aviation sector.

The good days

Unlike its competitors, which were budget carriers, Jet Airways was a full-service carrier. While most of the others who began flying along with it fell by the side one by one, Jet continued to grow by leaps and bounces. In 2005 the company went public making Goyal a billionaire. Forbes had declared him the sixteenth richest person in India, with a net worth of $1.9 billion.

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The company continued to grow and made its first major acquisition in 2007, buying Subrata Roy's Air Sahara for Rs 14.5 billion and renamed as JetLite. The new airline gave Jet space in budget carrier scene too while the parent company continued to operate as a full-service airline. This was followed by the launch of another low-cost carrier - Jet Konnect. In 2012 Jet Airways merged the two brands, JetLite and Jet Konnect and operated as Jet Konnect.

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Jet Airways, which by this point was the largest airline in India with a market share of 22.6% continued its impressive growth and got UAE-based Etihad Airways onboard as a partner. Etihad had purchased 24 percent stakes while Goyal remained the single largest investor controlling 51 percent shares.

Trouble begins

The fortunes of Jet Airways took a turn for the worse as the Indian aviation sector, in general, was in turbulence due to a number of reasons including rising aviation fuel price and operating costs. It was around the same time another private full-service carrier in India, Kingfisher Airways too hit turbulence and eventually shut down.

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By this time Jet, which merged JetKonnect with the main brand was playing catch up with the likes if IndiGo, SpiceJet, and GoAir in the low-cost carrier market and continued its downward spiral incurring more and more debt.

Bad to worse

Meanwhile, Jet Airways was also battling a PR crisis over a number of mishaps onboard the airline including one where passengers were left bleeding from their noses and ears after the crew failed to regulate the air pressure.

Late last year the signs of the acute financial crisis became apparent as the company began handing out pink slips to its staff, which was dubbed as cost optimization. This was followed by reports that including pilots and engineers are not getting their salaries. By earlier this year it became obvious that the airline is in deep trouble and only something extraordinary can save it.

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Initially, all eyes were on Etihad Airways which still has 24 percent stakes in Jet Airways. But the policy of no FDI more than 49 percent along with Goyal refusing to give up control ket UAE's national carrier away from investing more.

Uncertainty continues

Last month as it became clear that the airline won't survive without a miracle, the government intervened and asked the bakers to bail out the ailing airline to avoid another Kingfisher-like crisis.

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The lenders' consortium led by SBI agreed for a bailout on the condition that Goyal gives up his position as CEO and board member. At the time when the banks took control of Jet, the airline was in desperate need of Rs 1500 crore in emergency funding to stay afloat. The banks have so far unsuccessfully tried to sell Jet Airways, which is currently sitting on a debt of over Rs 8,500 crore. With no solution at sight Jet, it is almost certain to go into insolvency, leaving some 16,000 staff in an uncertain future.