Course Code: MKT 354
Course Title: Marketing of Financial services
Course Instructor: Ashwani Panesar
Academic Task No.: CA 3
Date of Allotment:
Academic Task Title: Project Report on Jet Airways Crises
25/03/2020
Date of submission: 17/04/2020
Student’s Roll no: A28
Student’s Reg. no: 11709567
Evaluation Parameters:
Learning Outcomes: I have learnt about What happened with Jet Airways and how it failed in the
Aviation sector. I have also learnt about the various reasons of failure and how they take steps to come
in former situation
Declaration:
I declare that this Assignment is my individual work. I have not copied it from any other student’s
work or from any other source except where due acknowledgement is made explicitly in the text,
nor has any part been written for me by any other person.
Student Signature
Evaluator’s comments (For Instructor’s use only)
General Observations
Suggestions for Improvement
Best part of assignment
Evaluator’s Signature and Date:
Marks Obtained:
Max. Marks: …………………………
PROJECT
ON
JET AIRWAYS
Submitted by Dhawal Raj
11709567
MKT 354
1
INTRODUCTION OF COMPANY
Jet Airways (India) Ltd. is a bankrupt and grounded Indian global airline based in Mumbai, India which,
on 17 April 2019, ceased all flight operations with its final income flight operated in Mumbai on 17 April
2019. It boasts a market share of about 45 percent. Jet operates a extraordinarily younger fleet of
Boeing 737 jets and ATR72 turboprops. It consists of about seven million passengers a year. Its
popularity for punctuality and terrific service attracts a giant percentage of business travelers. Jet's
founder and chairman is Naresh Goyal, an Indian expatriate residing in London.
Jet Airways, which commenced operations on May 5, 1993, has inside a brief span of 17 years
installed its role as a market leader. It's one of the quickest developing airlines in the world, and
now it's all set to change the way you fly - for the better!
The airline has had the big difference of being many times adjudged India's 'Best Domestic Airline'
and has gained quite a few country wide and global awards. Jet Airways flies to sixty-five domestic
and 20 global locations span the size and breadth of India and beyond, inclusive of New York
(both JFK and Newark), Toronto, Kathmandu Brussels, Muscat London (Heathrow), Riyadh,
Hong Kong, Dubai Singapore, Lumpur, Colombo, Bangkok, Dhaka, Kuwait, Bahrain, Doha,
Jeddah, Abu Dhabi and Kuala. Jet Airways is the most desired home airline in India. It is the
automatic first preference service for the traveling public and units standards, which other
competing airways will are seeking for to match. Jet Airways will attain these targets while
simultaneously making sure regular profitability, attaining healthy, long-term returns for the
investors and imparting its personnel with a surroundings for excellence and growth.
Jet Airways acquire Sahara Airlines which was renamed as Jet Lite. Jet Lite presently operates a
fleet measurement of 24 aircrafts flying to 31 locations inside India & operating around 127
flights daily. It also flies to Colombo & Kathmandu. As section of the ongoing diversification
programmed of his commercial enterprise activities.
2
Founded
1 April 1992
Commenced
5 May 1993
operations
Ceased operations
17 April 2019
Hubs
Chhatrapati
Shivaji
Maharaj
International
Airport (Mumbai)
Indira Gandhi International Airport (Delhi)
Kuiperoidal International Airport (Bengaluru)
Frequent-flyer
InterMiles
program
Parent company •
SBI led-Bank Consortium (51%)
•
Naresh Goyal (24%)
•
Etihad Airways (12%)
•
Public Shares (13%)
Traded as
BSE: 532617
NSE: JETAIRWAYS
Headquarters
Key people
Mumbai, Maharashtra, India
•
Naresh Goyal (Founder and former Chairman)
•
Vinay Dube (former CEO)
Revenue
₹252 billion (US$3.5 billion) (FY 2017–18)
Profit
₹-6.3 billion (US$−88 million) (FY 2017–18)
Employees
16,015 (2017
Website
jetairways.com
3
BACKGROUND AND HISTORY
Jet Airways (India) Limited (“JET”) is a Public Limited Company listed on each BSE and NSE.
The agency “Jet Airways (India) Limited” has its registered workplace at Siroya Centre, Sahar
Airport Road, Andheri (E), Mumbai - four hundred 99 Shareholding as on March 31, 2019. Jet
Airways (India) Limited (“JET”) used to be going through liquidity crunch & on 17 April
2019 briefly suspended all its worldwide & domestic operations. The cash-strapped
organization went into financial ruin after the Mumbai bench of the National Company Law
Tribunal (NCLT) admitted an insolvency petition filed by means of SBI on behalf of lenders on
June 20. Pursuant to an order dated June 20, 2019 of NCLT Mumbai Bench, Corporate Insolvency
Resolution Process (CIRP) has been initiated for Jet Airways (India) as per the provisions of
Insolvency and Bankruptcy Code, 2016. Upon initiation of CIRP, the powers of the Board of
Directors of the business enterprise have been suspended and shall be exercised by means of the
Resolution Professional. Mr. Ashish Chhawchharia has been appointed as the Resolution
Professional to take forward the CIRP technique for Jet Airways.
❖ Inception: 1992 – 2005
➢ 1992: Incorporated by Mr. Naresh Goyal (promoter)
➢ May-1993: Commenced operations as an air taxi operator with a fleet of four leased Boeing
737-300 a/c
➢ Jan-1995: Granted scheduled airline status
➢ Mar-2004: First worldwide flight commenced (Chennai – Colombo)
➢ Feb-2005: IPO (Indian exchanges)
❖ 2006 - 2012: Expansion
➢ Commenced operations to the UK (2005) and the US (2007) and started the use of huge
bodied a/c
➢ 2006: Maintenance hangar opened in Mumbai
➢ Apr-2007: Acquired Air Sahara and rebranded as Jet Lite
➢ 2007: Opened Brussels gateway with flights from India – US
➢ 2008: Focus on high-value regional global expansion (mainly Gulf)
4
❖ 2013 -2019: Strategic boom
➢ Nov-2013: Etihad Airways acquired a 24% stake for a complete consideration of Rs. 2,058
crores. ($380m). It further invested Rs 859 crores towards 50.1% equity investment in Jets
Frequent Flyer Programme, (Jet Privilege)
➢ Dec-2014: Repositioned as a single company and uniform full-service operator
➢ 2016: Strategic industrial settlement with Delta and Air France-KLM, shifted European
hub to Amsterdam
➢ 2017: Entered an ECA with Air France-KLM
5
ANALYSIS OF FAILURE OF JET AIRWAYS
Survival Strategy
Restructuring Plane Lease Agreements
The organization was faced with a serious mission that would determine their survival through the
challenging recession. The provider solely alternative was once to decrease their exposure.
Optimizing Fleet Size
Jet Airways took the decision to optimize its felt measurement to decrease the publicity to the
world recession that had affected the market. They executed the identical by
✓ Reducing non-worthwhile flights there through growing the choice to return high cost
leased aircrafts
✓ Delayed and deferred pre-purchased plane transport
✓ Leased pre-purchased aircrafts that have been in their position
Controlled Dividend Policy
Jet airways declared dividends for 3 straight years from March 05 to March 07. They then shifted
to a Controlled Dividend policy the place profits were retained and these earnings came to their
rescue at some point of the world slowdown.
Rationalizing Manpower From 2007 Till Date
The effort to rationalize man electricity had gathered a lot of media attention however structure
the organization factor of view they were left with a difficult state of affairs and so they had to
take the drastic decision of reducing down with their man power. Hence, we see that compared to
their expansion they have maintained a much less that proportionate expand in man power.
Enhanced Yield Management System
With the market opening up in the aviation sector, the market witnessed excessive enlargement
and over capability on a number sectors. Jet airways decided to remodel their Enhanced Yield
Management System. This gadget ensures that
6
•
Upfront cash float due to early hen tickets for journey 6 months hence
•
Enhanced Average Ticket Revenues (ATV) per flight
•
Higher manipulate of ticket prices where high demand seasons had been optimized
Reduction in Value of Sales
Cost of income was one issue where the airline noticed as a possibility to rationalize. Direct sale
is always viewed the lowest fee of sale. Hence all the advertising campaigns directed customers to
log on to the website for the cheapest fares of the day.
Rationalization of Workplace Space
Various office lease agreements had been re-negotiated and a range of unnecessary office locations
were either clubbed of cancelled.
New Company Identification and Manufacturer
Due to all the negative publicity and the truth that the market perceived Jet Airways as a nongrowing and stagnant player, there was a rebranding and remodeled market approach to talk
confidence in the Jet Airways story.
Failure of Jet Airways
Jet Airways shut down its operations quickly on seventeenth April of 2019. Their closing flight
was from Amritsar to Mumbai. The shutting down of the business enterprise affected 20,000
personnel and greater than 60,000 people indirectly. The organization is reportedly in a debt of a
billion dollars.
When the 2008 financial disaster hit, the still developing Indian Aviation market declined. Passenger
numbers dropped and airways have been compelled to either drop the prices, which they did at first or
to raise them when fuel fees soared. But Jet Airways had two greater problems. The airline these days
acquired Air Sahara, which price a hefty sum of money.
Secondly, Low-cost carriers have been starting to dominate India ‘s skies. With the monetary disaster
impacting tourist numbers, Jet Airways did no longer make any choices to soften the hit. Passengers
commenced to prefer affordable airways like IndiGo because of their decrease ticket expenses and Jet
Airways was in even more trouble. But the trouble was, that Air Sahara was once now not a cheap carrier.
The airline ran the equal business model as Jet, so in actuality Jet Airways simply paid a lot of money for
additional aircraft, routes and parking slots.
7
Reasons of Failure
1) Purchase of Air Sahara for $500 Million
Trouble began for Jet Airways way returned in 2006, when it purchased Air Sahara for a whopping
USD five hundred million. Many humans had cautioned Naresh Goyal, the then CEO of the airline,
to not go beforehand with the deal as the rate was once a little too high. But, little did Naresh Goyal
care about the advice he got, he went in advance and closed the deal with Air Sahara. The budget
service used to be renamed 'Jet Lite', it suffered losses and the Jet Airways wrote its whole
investment off
2) Poor Management
Poor Management was once there in walking all operations of Jet Airways. Experts agree with that
Goyal need to have a primary flaw was the chairman's fashion of management. There used to be
solely one administration group and this used to be headed with the aid of Goyal himself. The
administration group two separate managements to run the full carrier core and finances flyer
Naresh Goyal was accused of making bad funding choices and lacked transparency He also failed
in addressing the company's ailing monetary state. In easy words, the Jet Airways spent way more
than what they have to spend.
3) Low-Cost Carriers Were Underestimated
The aviation enterprise IndiGo and Go Air is incredibly aggressive Jet Airways did no longer they
earned and stored piling debt and Jet Airways failed to compete with the low value airways trio of
SpiceJet, take the low-cost trio seriously, which have been established in 2005-06. The trio
provided airfares at low value and also flew to unserved routes. The trio is attractive to clients who
are fee sensitive
4) Fluctuation in Oil Prices and Fall in Rupee
All Indian carriers are rather sensitive to fluctuations in global crude prices, as India continues to
be a main importer of crude oil. The Rupee has fallen towards important currencies and this has
8
made crude oil a main burden on the aviation industry No Indian service was once spared from
charge fluctuation while Jet suffered the most
5) Failure to Find an Investor
Jet Airways failed to discover strategic investors to pump massive cash into the corporation and
this resulted in an economic crisis. Jet's attempts with Tata and Etihad Airways failed and led to
Naresh Goyal's exit from the management, as a section of debt resolution deal which saw lenders
consortium led through SBI, taking over the airline.
6) Drowning in Debts
Jet Airways used to be never appropriate with money. It kept on incurring money owed and
spending more than its revenue. The personnel were paid lavishly when compared to the industry
standards. For the sake of presenting comfort and luxury, the Naresh Goyal backed airline
compromised with finances.
GOVERNMENT INTERVENTION IN JET
AIRWAYS CRISIS
The authorities on the exceptional hand reportedly requested the banks to store the employer
barring pushing it to bankruptcy. With unemployment being a necessary electoral subject for the
government, an addition of 20000 to the record of jobless Indians will entirely provide more
substance to the Opposition. The Government is therefore pulling out all stops to end Insolvency
of Jet.
Jet has more than $1 billion in debt, and owes cash to banks, suppliers, pilots and lessors - some
of whom have started out terminating leases with the carrier. Bankruptcy is the “last option” for
Jet Airways, State Bank of India’s (SBI) chairman stated on Wednesday, adding that it may still
be feasible to draft in a new investor to hold the airline flying. It is precisely two months to the day
that Jet Airways ceased operations as India’s 2nd largest airline via passengers. And as information
got here in on Monday evening about the lenders eventually taking Jet to the insolvency and
bankruptcy (IBC) process, there seemed little danger of the airline flying ever again.
9
It is exactly two months to the day that Jet Airways ceased operations as India’s second biggest
airline by passengers. And as news got here in on Monday evening about the lenders subsequently
taking Jet to the insolvency and financial disaster (IBC) process, there seemed little threat of the
airline flying ever again.
Consequences have been of such a brilliant stage that an employee of Jet Airways committed
suicide in Mumbai. The man used to be a most cancers affected character and used to be on a
damage from his job. Shailesh Singh was once a Senior Technician in Jet Airways. He jumped
from his constructing due to melancholy on twenty seventh April, 2019. Jet Airways shut down its
operations temporarily on 17th April of 2019. Their final flight used to be from Amritsar to
Mumbai. The shutting down of the corporation affected 20,000 personnel and larger than 60,000
humans indirectly. The corporation is reportedly in a debt of a billion dollars.
The authorities are keen to explore all preferences for floundering Jet Airways earlier than
initiating insolvency complaints underneath the insolvency and economic spoil code. The
authorities have also indicated to the banks that it favors Indian participant defending a majority
stake in the bothered airline. A senior government dependable tested the improvement however
referred to that banks themselves are no longer inclined to go to economic damage court
Jet owed its lenders, led via the State Bank of India (SBI), more than Rs 8,000 crore before it
ceased operations. It owed suppliers and providers an awful lot more. Some estimates have put the
complete dues to vendors, lessors, different suppliers and creditors at nicely over Rs 20,000 crore.
The government has asked state-run banks, led by means of SBI, to rescue Jet besides pushing it
into bankruptcy, two people inside the administration have instructed Reuters as Prime Minister
Narendra Modi seeks to prevent thousands of job losses weeks earlier than a frequent election
On the 10 August Jet Airways announced the Bidding method of their company. On that day it
was once determined that SBI led-Bank Consortium (51%) Naresh Goyal (24%) Etihad Airways
(12%) Public Shares (13%) Now the parent agency of Jet Airways is SBI Caps which is having
51% of stake in Jet Airways and help Jet Airways to come out from this economic situation.
10
CONCLUSION
Jet Airways is on the verge of Bankruptcy. However, there's nevertheless some mild at the give up
of the tunnel. Many entrepreneurs have come forward to employ humans who lost their jobs due
to the Jet Airways crisis. Many have been absorbed via opponents such as SpiceJet. If anybody in
the end buys Jet Airways, there's hope for the ex-employees of the bankrupt airline to get their
dues. The Indian Government's role is pivotal in determining the path this crisis takes.
Shutting down Jet Airways is due to quite a number factors, few of them are incompetency, terrible
management, high gasoline fees and lack of ability to locate investors
Jet Airways and the Government are attempting every feasible situation to revive the once biggest
airline of India, however even with
revival shareholders and traders would suffer losses. For now, airfare has seen a surge and requires
some time to get returned to everyday
11