Analysis

Could Jet Airways Be Saved?

The second largest airline of India, Jet Airways, is currently at a fork in the road. One direction leads to its bankruptcy, its fleet split up amongst rivals and its namesake retired to a long list of winter fatalities. The other, much harder challenge is it’s financial about-turn and rise to triumph, beating it’s low-cost carrier competitors and claiming its historic spot as the number one airline in the sub-continent.

Jet Airways aircraft on tarmac

Jet Airways canceled all international flights and grounded 90% of its fleet. Photo: Jet Airways.

What is Jet Airways’ current situation?

We previously wrote an extensive look at the history of the airline to better understand its situation. Right now, most of their fleet is grounded, they’ve failed to make loan payments and their benefactor airline Etihad has said they will not bail them out. It has become so bad that the CEO and Founder of the airline, Naresh Goyal, has been forced to resign

Essentially, it comes down to these key factors:

  1. Competition and price wars in the marketplace
  2. Year after year of massive losses for the airline
  3. Grounding of the 737 MAX fleet (Jet has five so far, but 217 on order)
  4. Lack of cash flow as the airline struggles to make sales
Jet Airways

A Jet Airways 777-300ER. Source: Wikimedia

Should Jet Airways be saved?

Before we dive into some possible ideas on how to save the airline, we should discuss whether it is worth saving.

The first reason is the fleet. Jet Airways already has a huge fleet in India and has massive access to the marketplace. With 115 aircraft operating across the country (and another 227 on order), Jet Airways is well positioned to expand in the region and have more capacity than any other Indian airline.

The second reason is the brand. Jet Airways has been operating for just short of of 30 years, and has built up trust with the local population. Their name and branding carry plenty of weight in the territory.

So how can we save the airline? Here are some ideas

Focus on international routes. Due to a lack of aircraft capacity, Jet Airways has been forced to only fly domestic routes. They were previously very popular (with their premium cabins as well) with many local expats traveling home as well as tourists arriving to explore the country. However, a return to international operations will not be easy as they recently gave up their Heathrow landing slots. Until they pay lessors and get their fleet back in the air, the DGCA will not allow them to fly internationally again.

Canceling future 737 MAX orders. We are not advocating that Jet Airways simply cancel the 737 MAX orders due to problems with the aircraft (that is another discussion), but they are over-leveraged and could use this time to actually get back some of their money or ‘debt’. This would put them back on a good footing with Boeing who have previously defended the airline.

Reduce operations. Essentially, Jet Airways needs to become as lean as possible and reduce services. They are already doing what they can but they should stop anything that is not highly profitable.

Raise prices and focus on the premium market. To beat the competition, Jet Airways should price itself out of the competitions reach (by actually increasing prices) and bringing value to customers beyond A to B transportation. This could be the Southwest model (free transfer of tickets, two items of baggage etc) or offerings outside of the aviation space (deals with hotels, membership programs).

Jet Airways

Over 1000 Jet Airways pilots are set to go on strike. Photo: Rick Schlamp via Wikimedia

Wait, don’t they owe over a billion dollars?

Yes, it is true that Jet Airways owes over a billion dollars and it would be almost impossible to find a benefactor willing to take on that load. But in order to help they have taken the following steps:

  • Opened up 51% of the company to private investment on the stock exchange (shares previously held by the founder).
  • Shopping the airline around to other partners like Etihad (perhaps another airline will use this chance to come into the growing Indian market).
  • The Indian government recently asked local banks to help bail out the airline. Perhaps they will be able to provide assistance.

What do you think? Do you have any ideas on how to save the airline?

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