Factors Leading to the Closure of Jet Airways

The bad moves of Naresh Goyal-owned Indian carrier formed a chain of series, which have eventually staggered the aviation company.
  • BY Jaspreet Kaur

    Feature Writer, BusinessEx

  • |
  • Apr 29,2019
  • |
  • 13 Mins Read

Jet Airways, India’s low-cost carrier is having a bad phase in the aviation industry. After grappling in the past financial year (FY 2018), the financial backdrop of Jet Airways has weakened, ultimately, led non-payment of loans amounting to $1.2 billion, and remuneration of employees.

As per the reports of Indian daily news, India Today, Jet Airways has not paid salaries to pilots for the month of January, February and March.

Besides non-disbursement of employees’ salaries and loans, there are various other causes that have led the downfall of India’s largest aircraft carrier, Jet Airways. The bad moves of Naresh Goyal-owned Indian carrier formed a chain of series, which have eventually staggered the aviation company.

  1. Jet Airways Acquired Air Sahara

In 2007, Jet Airways bought Air Sahara, now known as Jet Lite, for a sum of INR 2050 crore. According to then-market analysis, Jet Airways paid a higher price for the acquisition of Air Sahara, as reported by the Indian daily news, The Economic Times.

The financial problems of the Indian carrier, Jet Airways begin from this move. Following the acquisition, Air Sahara was named as Jet Lite, which had later fallen apart in 2015, as the company lost chunks of money. This loss resulted in Jet Airways using its entire investment to save its then-budget arm, Jet Lite.

  1. Investors Refused to Back Jet Airways

Owing to the rising prices of crude oil and downward fall of the Indian currency, the Indian aviation industry was massively affected leading to financial losses in major carriers namely, IndiGo, Spice Jet and Jet Airways.  

As Jet Airways also reported losses in the financial year 2018, it becomes difficult for the Indian carrier to lure investors so as to pay debts. Earlier on, Jet Airways was in talks with TATA, as well as Etihad Airways, one of the largest airlines in UAE, declined to endow money to the carrier.

“Jet chairman Naresh Goyal had asked Etihad, which has 24 per cent stake in the airline, to bring in INR 750 crore demanded by lenders as promoter contribution. Etihad, however, expressed that it was willing to sell its 24 per cent stake if it got a price of INR 150, which is much lower which is lower than the current price of INR 236,” as reported by the Indian daily news, The Times of India.

 

 

  1. Naresh Goyal, Chairperson Of Jet Airways, Asked To Resign

On March 25, 2019, Co-founders of Jet Airways, Naresh Goyal and his wife, Anita Goyal, stepped down from the company’s board. In addition, one nominee of Etihad Airways resigned from the board committee.

The move was carried out in accordance with SBI’s resolution plan, wherein two directors, as well as Naresh Goyal, will have to resign from the board committee.

  1. Jet Airways’ Employees Carried Protests

As Jet Airways is drenched in debts, the carrier has not paid salaries to its aviation staff for almost three months. Owing to which, the employees are protesting across India to seek disbursal of their salaries.

The Indian carrier, Jet Airways has not disbursed salaries more than INR 450 crore to aviation staff, essentially engineers, general managers and pilots, as per the reports of the Indian daily news, The Hindu.

  1. Views of Subramaniam Swamy on Jet Airways collapse

Subramaniam Swamy, a renowned economist and politician has proposed the government to merge the Indian government-owned Air India and Jet Airways.

“The Ministry of Civil Aviation should strongly recommend to the cabinet that Jet Airways should be merged with Air India not only to ensure air services are not restricted but also to enable Air India to recover its former premier position,” Swamy said to the Indian daily news, The Hindu.

“There is a panic in the cartel that merger of Jet Airways with Spice Airways may take time despite RBI helpful circulars. My SC case against the India-Jet-Etihad bilateral and FDI is to come up soon. Merge Jet with AI & save nat security,” said Swamy in his Twitter account.

The collapsing Jet Airways, once considered the second largest Indian carrier, is tried to shore up by lenders, essentially banks and the Indian government. It’s time to see how the bankers along with the government will be making moves to save the Indian carrier from getting closed down.     

 

 

 

 

 

 

 

 

 

Please add your Comment

More from Jaspreet Kaur

Our Group Companies

Get Industry First Insights

Sign up for our exclusive Newsletter

  • Follow BusinessEx
Stay tuned & get updated