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Drowning Jet Airways raises serious questions
Finally, the Chairman of Jet Airways Naresh Goyal and his wife Anita Goyal resigned from the board membership of Jet Airways on March 25, 2019. After this, Jet Airways' lenders took control of Jet's board and management.

Under the leadership of the State Bank of India, the banks' lender group has agreed to put Rs 1500 crore immediately to get 51 per cent stake in Jet. New shares worth 11.4 million will be issued for this. Jet Airways has to pay around 8,000 crore to 26 banks. So far, more than 80 Jet's aircraft have been out of operation. However, after Goyal's resignation, in BSE stock exchange Jet's shares rose by 12.69 per cent.

The condition of Air India is also deteriorating. Air Sahara, Kingfisher, East-West Airlines, Skyline NEPC, Modilufta etc. have closed in the past. At the time of closure, Air Sahara had 17 per cent stake in the market. In such a case, the question arises that the situation in the aviation sector is not as good as it looks from outside.

Who will buy Jet?

The loss of Jet Airways has increased to more than 13 billion rupees and it has to pay a loan of Rs 63 billion by March 2021. However, its financial condition is not good for the past 11 years. So far Jet's shares have fallen 71 per cent. In this case, it is being said that it can be sold. According to an estimate, Mukesh Ambani or Tata Sons can buy Jet Airways. Naresh Goyal's stake in Jet Airways is 51 per cent. In 2013, Goyal has already sold his 24 per cent stake to Etihad Airways. Tata Sons already own two airlines, Vistara and Air Asia. They have 41 per cent stake in Vistara. Vistara is a joint venture of Tata and Singapore Airlines.

Reasons of failure

Jet is not able to pay the salaries to its employees due to mounting losses. Due to allegations of financial irregularities, the raid on the company's Mumbai and Delhi offices by the Income Tax Department has also blemished its credentials. Jet Airways was spending more than one rupee on other expenses except for the cost of fuel, compared to Indigo, so that by the end of 2015, Jet was earning 50 paise per kilometer on every seat compared to Indigo. In order to go ahead from Jet, Indigo lowered the ticket prices, but Jet did not, due to which it came into loss, which it could not compensate later. Jet suffered the biggest loss in 2017, when fuel prices started to rise. Due to the already being in debt, its condition worsened even more.

The financial condition may further get worse

The group of lenders has taken over the management of Jet, but finding a buyer of Jet will not be easy for them. Most importantly, banks have no experience in the aviation sector. Etihad Airways, which has 24 per cent stake in Jet Airways, has written in a letter to the consortium leader, State Bank of India that it is ready to invest Rs 150 per share in the jet, while the existing stock price of Jet is Rs 275. It can be said that the lenders can face many more such difficulties in this regard.

Will the government bring a solution?

It is being said that due to political compulsions, the government wants to save the jet. Modi Government wants to give message that economy is in better condition in the country. The government doesn't want take any risk before the 2019 general elections.

For some years, the Modi government has been constantly praising its achievements about aviation connectivity in the country. The government has also been claiming that the common man wearing a sleeper can travel on aircrafts. Construction of new airports and increased number of flight services have been shown by Modi Government as development activities. In such a situation, the drowning of a big and renowned company of the aviation sector like Jet Airways will raise serious questions on the policies of the Modi government.

Will the financial condition of Jet improve?

To improve the performance of the jet, the performance at operation level needs to be improved and employees should be trained at all levels, because the pilot, cabin crew members, staff of engineering section, ground handling staffs etc. paly important role in this regard. Intelligent use of planes, such as the route on which the passenger's traffic is high, more than one aircrafts can be used. By the way, there is a need to make more use of the planes, which consumes less fuel. Advertisement can be used to woo travelers. Reduction in passenger fare is also a good option. According to the festivals, travelers can be tempted through schemes. For this, basic fare may be reduced. Lower fares can be compensated by increasing frequency of flights. This goal can also be achieved by committed and quality service.

Conclusion

It can be said that the dazzling world of the aviation field looks brighter from the outside, but in reality it is not. The loss of Jet Airways shows the same truth. It is clear from the investigation that the cost of airlines in the aviation sector is high, but revenue is less. Their financial condition further worsens in the round-the-clock competition. In such a case it can be said that there are still many difficulties in making air transport available for common man. The negative part of this area is that the region is not bright in terms of security and compensation provisions also.

About the author: Satish Singh is currently working as Chief Manager in State Bank of India's Economic Research Department, Corporate Centre, Mumbai, and has been writing mainly on financial and banking topics for the last 10 years.

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of merinews.com. In case you have a opposing view, please click here to share the same in the comments section.
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