Jet Airways

Topics: Airline, Malaysia Airlines, Avianca Pages: 7 (2212 words) Published: April 19, 2013
Background of the Company
Jet Airways was incorporated as an "air taxi" operator on 1 April 1992. It started commercial airline operations on 5 May 1993 with a fleet of 4 Boeing 737-300 aircraft, with 24 daily flights serving 12 destinations.

In 1991, the late P.V. Narasimha Rao, Prime Minister of India at the time, introduced an "open skies" policy as part of India's economic liberalisation. This opened doors for privately owned "air taxi" operators to start scheduled services. Naresh Goyal, who already owned JetAir (Private) Limited (which provided sales and marketing for foreign airlines in India) took advantage of this opportunity by setting up Jet Airways as a fullservice scheduled airline that would give competition to state-owned Indian Airlines. Indian Airlines had enjoyed a monopoly in the domestic market between 1953, when all major Indian air transport providers were nationalised under the Air Corporations Act (1953), and January 1994, when the Air Corporations Act was repealed, following which Jet Airways received scheduled airline status.

Jet Airways’ 45 destinations include most of the big cities in India. International destinations include Kathmandu, Colombo, Singapore, Kuala Lumpur, London's Heathrow Airport, Bangkok, Brussels and Newark. Jet Airways was the first private airline in India to fly to international destinations. It started international operations in March 2004 between Chennai and Colombo after it had been cleared by the Government of India to operate scheduled services to international destinations. MACRO ENVIRONMENT FACTORS:

Economic environment of India and world affects the airline industry to a great extent. Factors like fluctuations in global fuel prices, exchange rates, slowdown etc have varying impact on the way Jet Airways has been operating in this sector. One of the most important aspect that has greatly affected the world's transportation system is the high fuel price. Besides high taxes, jet fuel prices have become costlier than crude oil prices which have greatly affected the bottom-line for many airlines including Jet Airways.

State taxes on ATF available through government agencies vary between 4% and 30%, making the fuel 30% to 50% costlier than the global average. In Tamil Nadu, Karnataka, Bihar, Madhya Pradesh, Gujarat, West Bengal, Maharashtra and Himachal Pradesh the cess is 25% or higher.

The three listed airline companies – Jet Airways, Kingfisher and SpiceJet – all of which reported losses in the quarter ending December 2011, blamed rising ATF cost for their bad financial performance.

In February 2012, the Centre gave a nod to direct import of ATF on a case-to-case basis But once airlines start importing ATF, traffic at the country's congested ports is likely to increase, making matters worse for exporters and importers. Airlines will also have to factor in the cost of transporting ATF from the various ports in the country to airports around the country, something which could eventually lead to increase in the ATF cost. Jet Airways in its financial report has also indicated the losses that it has incurred due to rupee depreciation. It has been reported that revenue from exceptional items decreased by 61% from Rs.18,919 lakhs in Fiscal 2011 to Rs. 7,319 lakhs in Fiscal 2012 mainly on account of depreciation of the Rupee against the Dollar in the current year. Even in the past Jet Airways has experienced slowdown because of global recession. In 2008 during recession, Jet Airways was forced to discontinue the following routes: Ahmedabad–London, Amritsar–London, Bangalore–Brussels and Mumbai–Shanghai– San Francisco. It also had to put an indefinite delay on its expansion plans. Naresh Goyal, Jet Airways promoter is unable to put in more funds via his holding company due to FDI restrictions. He holds 80% in Jet Airways through Tailwinds. He claims NRI status, where 100% ownership is allowed. However, Goyal’s investment is...
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