Submit :
News                      Photos                     Just In                     Debate Topic                     Latest News                    Articles                    Local News                    Blog Posts                     Pictures                    Reviews                    Recipes                    
  
The ailing aviation sector in India
Jet Airways has suspended all its operations with 20000 employees facing threat of loss of jobs. The airline, which had come to define premium service in the Indian aviation market, had asked its consortium of lenders led by the state-run State Bank of India (SBI) for emergency funding of Rs 400 crore.

The lenders, who own a majority stake in the airline, however, refused, saying they were focusing on a bidding process at the end of which, expected to be at 10th May, they hope to find an investor who can infuse fresh funding in Jet Airways and turn the airlines around.

The airline owes lenders around Rs 8,500 crore. It has been unable to pay rent for the planes it leased, forcing creditors to take over its aircraft. In the end, Jet Airways was left with just five planes compared to its mammoth fleet of 123 passenger aircraft as of December last year.

Troubles for Jet Airways, which was founded by Naresh Goyal (who ignominiously exited the airline he built and ran for 25 years earlier this month) in 1992, began a year ago. The airline posted back-to-back losses and in order to continue operations took loans.

Even with Etihad on board, Goyal repeatedly flirted with Delta Air Lines. With an FY18 net income of close to $4 billion, annual cash flows of over $7 billion and almost no presence in the big Indian market, Delta could have been Jet's richest suitor. It offered Rs 300 per share. But Goyal wanted over Rs 400. 

Even, at the beginning of April, the central government and the lenders hoped that with adequate funding and 75% capacity utilization, if achieved by April end, Jet would regain lost value and attract good price minimizing the haircut. But, in-stead, funding didn't come and consequently operation had to be shut down. This is the worst instance of mismanagement on the part of the lenders and the ministry.

Earlier Kingfisher vanished from the market with the owner fleeing the country. The story of its mismanagement need not be repeated. Air India has been in ICU for quite some time, although, with the government occasionally infusing funds to keep it afloat. No buyer agreed to buy it with around ?55000 crores of debt. It is staring at debt repayments of Rs 9,000 crore in the current fiscal year but sorely lacks the wherewithal to service them. The ministry of civil aviation and the airline have escalated the concern to the finance ministry,

As the Vice-President said, Implementation is the crux of the entire governance paradigm which requires measures to build a culture of monitoring, evaluation and constant reform. Such culture does not prevail, it seems, in these airlines and the aviation ministry. Expansions and borrowings are made without ensuring their viability and future generation of cash flow adequate for servicing them. The other notable fact is that the BODs in these airlines appear to be most ineffective in guiding, monitoring and evaluating the performances current and future. These airlines are run mostly at the whims of the owners/CEOs. These are the areas where reform must be initiated at first.

The writer is a long-standing commentator on contemporary issues.

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.
COMMENTS (0)
Guest
Name
Email Id
Verification Code
Email me on reply to my comment
Email me when other CJs comment on this article
}
Sign in to set your preference
Advertisement
merinews for RTI activists


Advertisement
Not finding what you are looking for? Search here.