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Behind the scenes of Jet Airways crisis

15/05/2019

HospiBuz Desk

Can you save your wealth if your watchman is a thief? Obviously, you cannot. Something similar happened with Jet Airways and its employees. They did a mistake which any businessman can do. But the question is where did they go wrong. It was the best Aviation company. Still, it faced the downfall. If a company like Jetairways can face a crisis, why can’t yours? Let us see an analysis of what happened to Jet Airways and how you can save your company from such a mistake.

Jet Airways is known for their luxury but are they utilizing it in a good way. From the last fifteen years, meetings of Jet Airways are organized in 5-star and 7-star hotels. They book a lot of luxury rooms, order expensive drinks and they start a discussion of how much Jet Airways has lost this year. Sometimes the loss is worth Rs 500 crores sometimes it is Rs1000 Crores. I wonder how much they spend in these hotels to discuss their losses and worries. Jet Airways is India’s biggest Airlines with more than 20,000 employees. Approximately 1 lakh families are dependant on Jet Airways. And each one of them including our country’s economy is suffering today.

Jet Airways had a Market share of 44% in 2004 which came down to 15% by the end of 2018. One reason is the entry of new players in the Aviation Market. Spice Jet, Indigo, Go Air entered and started a price war. A price war is not always beneficial. From Economical point of view, the consumer, producer and government, all three should receive the benefits. But in the case of a price war, the consumer receives the benefit while the producer suffers. Same is happening with Aviation and Telecom Industry. We all are a witness of what happened to Idea and Airtel after Jio entered the market.

Jet Airways is known as a Full-Service Airline while the other players are Low-Cost Carrier. Some experts say that since Jet Airways provides a lot of services, they have suffered a loss. When scrutinized properly they have the same planes, same runways and almost the same seats. Talking about their free food, it is extremely bad in taste. Considering it the only reason for the downfall of Jet Airways is not a complete justification. Jet Board had renowned Ex Vice-Marshals of Airforce and some well-known Bollywood celebs like Shahrukh Khan, Yash Chopra and Javed Akhtar. Even the man in himself Mr Ratan Tata showed his interest in Jet Airways. But the founder Mr Naresh Goyal never handed over the management to anyone of them. But Why?

Well, Jet Airways got a loan of Rs 20,000 Crores on the private capital of just Rs114 Crores. The loan which they got was 175 times more than their worth. Sounds fishy right!! Seems like SBI had a soft corner for Jet Airways. The scenario in India is not so transparent. The profit visible in your books is way less than the profit you have earned. Now the question arises if the loan amount was of Rs20,000 Crores and their assets were worth Rs 12,000 Crores, where is the remaining Rs 8000 Crores and the profit earned in all these years? The purchasing of the Jet were 3 times more expensive than other Airlines. The management knew very well about this overpricing but still, they were quite!!!

Earlier Aviation was a matter of luxury. At that time the pilot was the king with high incentives. Time changed and after the entry of other players, it became a necessity. Today people use airlines to save their times. But Jet Airways is still working on this old concept of Pilot being the King. They give high perks and salaries to their pilots. Each airline has one or two types of planes. The lower varieties of planes you have the lesser will be your expense in licensing, maintaining and pilot training. But Jet being the extravagant one had 5 to 6 varieties of planes. They bought the planes which earned them higher commissions. And this is not surprising because the founder Mr Naresh Goyal had a travel agency before Jet Airways. And Travel Agencies are directly proportional to commission!!!

Experts say that Airlines in India is a money making machine. Each and every plane of an airline is always filled with passengers. India had just 10 cargo planes but Jet Airways had their own private company called Jet Air Pvt Ltd which owned the cargo planes. They earned a lot of money which completely belonged to Jet Airways. Where did it all go? After so much profit why Jet Airways faced a downfall. It was even proposed that Jet Air Pvt Ltd will but Jet Airways. But it never happened. I wonder if Mr Naresh Goyal is anywhere less corrupt than the Bankrupt King of Kingfisher!!!

Now, what you as a businessman can learn from this case of Jet Airways. Business is a game of intentions. If your intention is to earn a lot of money you will cross all your limits. Once your company goes beyond your thoughts, your greed becomes more than your company. And this is when cases like Jet Airways and Kingfisher happen. 99% of people would say that business is done for money making. Maybe you would have done the same if you were the owner of Jet Airways. No doubt, the objective of a business is to earn money. You need to give salaries to your employees, pay tax to the government, give returns to the investors. But when your intention is to make personal wealth, such cases will happen and your employees will suffer. When your company works well, you earn the trust of your consumers and investors and that is when your company becomes a brand. The brand earns money for you. Consumers pay for the brand. This is the 21st century. Your company ought to be transparent and trustworthy. No one is a fool today to ignore the flow of cash from the consumer’s pocket to the Producer’s locker.

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