FALL OF AN EMPIRE – JET AIRWAYS

The suspension of operations at Jet Airways the India’s largest private airline
follows the similar kind of trouble faced by Kingfisher, Air Deccan, and Sahara
in the past. Birth of Jet Airways was on early 1990’s. It was time India started
embracing globalization and private enterprises.

After repealing the Air Corporation Act, the government announced an Open
Skies policy in 1992 to liberalizing rules and regulations to open up the
commercial civil aviation market. This trigger the rise of ModiLuft, Damania
Airways, Air Sahara, East-West Airlines, Jet Airways etc. But sooner these
operators either folded their operation or merged with Jet Airways- which stood
an efficient operator and gaining market share with each passing year.

The private airlines began to flourish in domestic market of India in early

2000s. In 2003, Captain G R Gopinath started the India’s first low-cost carrier
Air Deccan, which was followed by the launch of SpiceJet, IndiGo and Go-Air.
All these airlines compete each other in satisfying their customers with cheaper
tickets, and higher passenger load factors.

The low-cost carrier model revolutionized the Indian aviation sector, pushing
the country’s annual passenger growth rate to double digits. Alongside the low-
cost carriers, Kingfisher Airlines started operations in 2005, pitching itself as
full-service carrier. These new airlines emerged as a great challenge to Jet
Airways, which had so far operated largely in a duopoly with state-owned
carriers Air India and Indian Airlines (which were merged in 2011).

In race for capturing market share both Kingfisher and Jet Airways started
acquiring other airlines. Jet Airways acquired Sahara Airlines at a cost of Rs.
1450 crore in 2007, a business move marked the beginning of the company’s
troubles. Kingfisher shut down its operations in 2012. Jet Airways was also in
distress but survived collapse when Abu Dhabi’s Etihad Airways bought a 24
percent stake. In order to compete with low-cost carriers, Jet Airways has also
lowered prices without reducing its lucrative services without considering the
past experience .

Jet Airways, which had a king size 44% share of the domestic passenger market
in 2003–04, steadily lost ground , the deeply troubled airline had only 10% of
the domestic market share, fourth behind IndiGo (43.4%), SpiceJet (13.7%) and
Air India (domestic, 12.8%) as per Feb’2019.

In 2004, the government of India announced a major policy change, allowing

Indian scheduled carriers with a minimum five year continuous operations and a
minimum of 20 aircraft (the so called 5/20 rule) to fly international routes. Jet
was the key beneficiary of this policy change. In 2016, the government made
some reforms in aviation rules thus, enabling SpiceJet, IndiGo and Go-Air to
launch international flights in the following years. This led to fierce competition
in domestic as well as international market.

Jet Airways is one of the few airlines in India that has had high loyalty in
employee ranking. They used to keep a good relationship with their
employees.

The launch of low-cost carriers disrupted the business model of the full-service
players, eating into their market share and creating stress in the market. The
wafer-thin margins, heavy competition, heavy tax imposed by government on
aircraft fuel and airport charges resulted in airlines turning commercially
unsustainable from time to time. Increase in oil price and volatility of Indian
currency worsen the situation of Jet Airways. Thus the company was start
grounding its planes because of an inability to pay for the airline leasing
companies.

On the other hand civil aviation sector is still under-reformed sector. There is
too much discretion at DGCA and ministry of civil- aviation. Everybody is at
the mercy of some civil servants, politicians or lobby. That’s why private sector
airlines have cultivated a lobby of politicians and bureaucrats to get favour. Jet
Airways was also not behind in this race. They had too have former bureaucrats
in board to help them to get that favour. Jet Airways, once – mighty carrier of
India should be protected from the collapse of their empire. Government really
need to bring new regulatory reforms to save charm of the most promising and
lucrative sector.