Jet Airways Financial Crisis: Another Air India In Making?

Jet Airways announced that the airlines will not be able to operate beyond 60 days unless several drastic cost-cutting measures are put into a place. This was a rude shock to the employees, stakeholders and the customers.

There were several reasons that contributed to the loss of the airlines; here we have mentioned the same.

Rising Fuel Prices

The oil prices came under a pressure after the trade dispute started between the United States and China, and other major economic blocs. India, which is the major importer of crude oil was worst affected by it. It not only widened the current account deficit gap, but many industries suffered from it, including the airlines. Jet Airways is the major victim of it, as per their management verdict. Rising oil prices created a low cash level situation in the company, which led to its downfall.

Intense Competition

Jet Airways has always been known for its dedicated customer service, inflight entertainment, frequent flier rewards programs, but the cut-throat competition from other premium airlines made the market tough for it. Apart from that, the company lost its market share because it catered to only domestic routes and not international destinations.

Mounting Debt Pressure on Jet Airways

Jet Airways incurred the net loss of Rs 767 crore in FY 2018 and the industry analysts predict that losses will be deepened to 1000 crore in the first quarter of the current fiscal. All this makes us believe that the airline financial position is in a bad shape.

Last but not the least; till date, the company has managed to limit the loss because of the income that it generates from selling and lease back of the aircraft engine; however HSBC has suggested that soon this income would become cost neutral because of the higher leasing costs.

In the end, we would like to say, similar to Air India though the management is trying to implement several measures (like a dialogue with stakeholders for a complete business support) to increase revenue and drive business efficiencies, but the mounting losses, firing of employees across various department, waive off of the bond terms for its first grade officers and mandatory one year notice period for pilots and commanders speak another story, isn’t?