The JET Lag! Will it fly again?

There once was a Kingfisher, a resplendent bird, that majestically flew from the scented meadows in the south over to the dusty deserts in the west, from the drizzling rain-forests in the east to the high mountains in the north, the timeless sea-shores garlanding the land, gliding over the river-banks and basking at the glory of the ever-giving Sun, relishing in the wheat farms in the harvest season.

There's a dash of déjà vu in the sky. The Kingfisher has gone. She lives in folk-tales now.

Historically, the airlines industry has always been one with tight margins ( like the retail industry) and flourished in the volumes game. Jet Airways was the first non-government premier airlines started way back in 1993 by Naresh Goyal. It sure is an achievement to survive and excel so long in this industry giving livelihood to so many and bringing the dream of flying to the masses (like Air Deccan).

So, how did Jet Airways get grounded?

This situation is eerily similar to Vijay Malaya's Kingfisher airlines in 2012. So, this time it doesn't even have it's shock value! Air-Deccan was saved of a similar fate by selling out to Kingfisher Airlines before that situation could occur.

Budget airlines or low-cost carriers (LCCs), which charge for traditional services such as food and seat allocation and offer low fares, function on a different revenue model as compared to traditional airlines.  To get the volumes there is a never-ending price war with competitors with concepts like 'no-frills' airlines and those ubiquitous Rs. 1/- Air Ticket sales in the past decade.

Coming back to Jet, it had been in the news (all for the wrong reasons) since over a year over employee strikes, 25% pay-cuts, 30 passengers nose-bleed incident due air-pressure imbalance in aircraft, firing employees siting vague reasons and then having to take them back etc. Even Tata Sons did show interest to buy and rescue the beleaguered airlines last year, but they backed out (which was a good decision for them in hindsight), as they already have their own airlines like Vistara .

Following are some of the reasons for the failure which I can derive:-

• Rising fuel prices
• High maintenance costs
• Losses incurred from subsidiaries such as JetLite and JetKonnect
• Falling airfare prices throughout the world
• Too many flights with under-booked seats
• Debt increasing every quarter and revenues falling.

So, there were enough indicators requiring strict actions. And to increase the debt even more, they ordered around 100 Boeing 737 Max planes (which itself has some safety concerns with two crashes this year) mid last year. It's like going on a shopping spree with no money in pocket, two credit-cards maxed out and a third platinum card issued to pay the bills!

There is now a debt of over Rs. 8000 crores which any potential investor would need for clear as well as arrange emergency funds to start the operations as soon as possible. Investors are thinking twice even to lend a relatively smaller amount of Rs. 400 crores to keep the airlines operational, as they think that this 'good' money would go down the drain as well. This shows low investor confidence in getting the return for their investment.

Should the government have intervened with a bailout package and let Jet Airways fly, keeping the business operational and save over 15000 jobs? Well, all will be clear on May 10 by which the bidding process will be completed.

The problem lies in the men at the top for not having the grit to accept their mistakes, putting good money over bad and not taking corrective measures. They resort to knee-jerk quick-fixes like bandages instead of the emergency surgery which is needed to cure the ailment from the inside. They turn a blind eye to the day-by-day deteriorating situation (every quarter) by digging their head deep in the sand like an ostrich - but the status quo remains and actually worsens beyond repair.

As they say, what got you here won't keep you here. One can't be complacent and one can't be overly-aggressive as well. You can't keep expanding if you can't manage the current business properly and profitably. There has to be a balance between sustenance and adventure.

In my opinion, Jet management should have bit the Ego bullet by curtailing it's operations to few important sectors like Delhi, Bangalore, Mumbai etc. It should have given 25% employees heads up to shift to other airlines and become leaner as an organization. It should have cancelled half or all of it's new Boeing orders (this model is anyway grounded throughout the world due to safety concerns over the nose-dive technical glitch), the money of which should have been used to consolidate the business and start bottom up again. Once you get the debt down, you can always think of expanding in future and getting your previous employees back.

Anyway, now in the Indian Airlines industry, my favorite airlines is Indigo. It is currently the leading and most profitable airlines. I just hope that Indigo learns from the mistakes of Kingfisher and Jet Airways.

It would be interesting to know what the people from the airlines industry think of it. Comments from other industries also welcome. :-)

The kingfisher was lost forever in wilderness - but the nightingale still recites it's tale in her mellifluous voice to the mesmerized vagabond travelers!

#jetairways #airdeccan #indigo #kingfisher #airlines