The Case of Jet Airways
Jet Airways: Background
Jet Airways (India) Private Limited was a reputed private airline in India having an average fleet age of 4.45 years. Jet Airways covers 63 destinations spanning the length and breadth of India and beyond, including New York (both JFK and Newark), Toronto, Brussels, London (Heathrow), Singapore, Hong Kong, Kuala Lumpur, Colombo, Bangkok, Katmandu, Dhaka, Kuwait, Bahrain, Muscat, Doha, Riyadh, Jeddah, Abu Dhabi and Dubai. The Airline carried 1.28 million passengers out of 408 million passengers carried by the whole airlines industry. It has a reputation for punctuality and outstanding service and consequently attracted a large proportion of business travelers. It operates with a fleet of 97 aircrafts, which includes 12 Airbus 330-200; 20 ATR 72-500 aircraft;11 Boeing 737-700;42 Boeing 737-800; 2 Boeing 737-900 and 10 Boeing 777-300 ER. The management had ambitious plans to develop its own hangers for maintenance and pilot training centers
Jet Airways: Competing with the Rivals.
On March 22, 2004 Jet Airways and rival private airlines in India were free to begin flying outside the country. Jet Airways had borrowed about $800 million to finance a new fleet of aircrafts. Jet Airways was poised to profit from an expected extension of flying rights throughout Asia. Colombo, Sri Lanka, was the first such international destination. Flights to Bangladesh and Nepal followed soon after. Over the next few years Jet Airways established itself as a leading player in India, becoming a case study for in-flight excellence. Possibly excited by this euphoria, industry insiders say, the management made its first big gamble by buying Air Sahara in 2006.
Apart from Jet Airways and Air India, Air Sahara was among the only three Indian carriers that flew abroad during that period. Naresh Goyal moved in to buy Sahara a year later for Rs 1,450 crores. Jet Airways fulfilled its desire to be the only “private” Indian carrier to fly abroad in 2006. Acquiring Sahara meant a huge drain on Jet Airways’s resources, both on financial and management fronts. All this happened at a time when the concept of low-cost carriers was completing two years in India. The domestic aviation market was growing at 30-40% and players like Air Deccan were challenging the full service carriers.
Crisis 1: 1900 Employees Sacked and Then Reinstated
Jet Airways had been constantly incurring losses since 2007-08."Buying Sahara was a big strategic mistake by Jet Airways. This happened at a time when Jet Airways was growing aggressively on the international front and facing tremendous competition in local market’, said the India head of the Centre for Asia Pacific Aviation (CAPA). The first sign of real trouble in Jet Airways became apparent in 2008 when Naresh Goyal entered into an operational tie-up with arch rival Vijay Mallya’s Kingfisher.
Sacking of 1900 employees
This step was followed by Jet Airways sacking 1,900 cabin crew members in October 2008, all probationary and temporary workers, across different departments. It was justified as an attempt to switch to leaner business models and cost-optimize the business operations of the airways.
According to Jet Airways, the layoffs were "unfortunate" but "unavoidable" because "everybody is losing" as the cost of business has gone up by 30 percent and the alliance is aimed at reaping "maximum synergies." "The economic viability of the industry has been severely affected by the record high fuel prices and most recently due to the crisis of the financial markets globally and the downturn in traffic," Jet Airways said in a statement. "Jet Airways expects these difficult market conditions to continue." Source TOI, Dt. 26th Oct ’08.
Jet Airways Airway CEO Wolfgang Prock Schaeu and Executive Director B Saroj Datta held a press conference in Mumbai where they explained the company’s decision to terminate the services of company employees....
References: 11. Tassell, Tony, "Jet Airways Leaves Its Indian Rivals Standing: Newer Aircraft Have Given Naresh Goyal 's Carrier a Private-Sector Lead," Financial Times (London), Companies and Finance, January 4, 1997, p. 13. accessed July 2010
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