Jet Airways May Soon Cease Operations If It Does Not Cut Costs Fast

Indian operator Jet Airways is looking to cut costs in order to ensure continuity. The airline won’t be able to fly after 60 days unless measures to cut costs are implemented. Staff pay cuts of up to 25% in addition to selling stakes of the airline were on the table.

Shares in the airline dropped 7% on Friday amid news of the financial troubles facing the airline. Yesterday the airline announced that it was no longer attempting to cut its staff pay by 25%. Strong backlash from pilots and engineers prompted this announcement. The airline said that the biggest short term problem that it faces is the “mismatch between high fuel prices and low fares”.

Employees had been told to book face to face meetings with senior management in Delhi and Mumbai. However, it was in these meetings that it became clear staff would not accept the proposed pay cuts. These were supposedly in addition to 25% pay cuts to senior management. Jet Airways signs pay agreements for three years at a time. The airline’s previous bilateral pay agreement lapsed on March 31st this year. The management has so far failed to start negotiations for the period from April 2018 to March 2021.

Jet Airways B737-Max in flight
Jet Airways has ordered 225 B737-MAX aircraft. Photo: Boeing

CEO Denies Problems

On the 3rd August the CEO of Jet Airways, Vinay Dube, spoke of the airline through an official press release. Mentioning that the Indian aviation sector was “experiencing strong growth”, he stated that the company was trying to create a “growth-oriented, sustainable future”.

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In line with the Company’s stated focus of creating a healthier and more resilient business, it has been implementing several measures to reduce costs as well as realize higher revenues, for desired business efficiencies. Some of these areas amongst others include, sales and distribution, payroll, maintenance and fleet simplification.

Whilst denying that the airline was facing financial difficulties, he confirmed that one of the areas that the airline was looking to optimise included payroll. The airline is expecting 225 B737-MAX aircraft to be delivered over the next decade, and Mr Dube claimed “This envisioned growth will in fact, require additional human capital.”. He was keen to point out that some of the cost saving initiatives being implements had already started to deliver positive results.

25 Years of History

Founded in April 1992, Jet Airways has grown to become India’s second largest airline. According to the Directorate General of Civil Aviation in India, the airline’s market share in India for the second quarter of 2018 was 13.9%.

This isn’t the first time that the Airline has attracted media attention for its human resources policy. In 2008 the airline announced it was laying off over 1000 staff. This prompted the Ministry of Civil Aviation to take action.  The chairman at the time claimed that pressure from the government played no part in reversing the decision. Instead he insisted that “he couldn’t sleep after seeing the tears in the eyes of some of the sacked employees”.

Whatever happens, within the next 60 days we’ll find out whether the airline is actually facing financial difficulty, or is truly just restructuring.

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