Virtual News

Jet Airways, the cash-starved Indian carrier, has suspended all operations from Wednesday night after the State Bank of India-led consortium of lenders turned down its request for emergency funds. The airline, founded by Naresh Goyal, was under ₹ 8,000 crore debt and struggled to stay afloat. The airline was the second-largest carrier in India by market share until recently.
The economic crisis
Jet Airways owes ₹ 8,000 crores to lessors, suppliers, pilots, and oil companies. The airline had only five jets left after dozens of others were seized by creditors in recent weeks. The lenders were reportedly searching for prospective buyers for the beleaguered company. The carrier had asked for ₹ 400 crores as an emergency fund. After it was denied, the decision to ground the remaining planes was taken.
Many aviation experts believe the start of Jet’s financial troubles can be traced back to the 2006 purchase of Air Sahara for $500 million in cash, news agency AFP reported. Naresh Goyal reportedly went ahead with the purchase despite being advised against it by his associates. The agency reported that his advisors said he was paying too much for Air Sahara.
JetLite crisis
The budget carrier was rebranded “JetLite,” but it led to a massive loss of money. In 2015, Jet Airways wrote off its entire investment. “The acquisition is still a millstone around the company’s neck,” Devesh Agarwal, editor of the Bangalore Aviation website, told AFP.
Mismanagement
Aviation experts say the Jet management underestimated low-cost carriers like IndiGo, SpiceJet, and GoAir. They were offering tickets at a lower price. They also launched flights on new routes, but Jet focused on corporates.”Jet always catered to corporates and failed to recognize that low-cost carriers were attracting price-sensitive customers,” industry analyst Amrit Pandurangi told AFP.Mr. Goyal’s management style is also in question, the experts said. They said his decision to have a single management team, headed by himself, running all Jet’s operations was a crucial mistake. The experts said the management spent more than it earned.”Jet lacked a concrete business model and fiddled with it often, which confused investors, (and) passengers alike,” said Mr. Agarwal.