Banks in Jet' lag

So Jet Airways, once pride of Indian aviation, is being consigned to history. Lenders rejected a lifeline in terms of interim funding to the airliner and left it with no option but to ground operations. The airline has been defaulting on payments, forcing its lessors to retake almost all its planes and was operating just about six planes till lenders refused to lend financial support.

The airline owes a total of Rs.7,251 crore to the domestic banks, Rs.1,400 crore to Mashreq Bank and Rs.910 crore to HSBC. Besides, it had raised non-convertible debentures worth Rs.700 crore in 2015, and has unpaid interest of about Rs.1,000 crore.

Failure of a strong aviation brand like Jet Airways after 27 years of reputation makes sense to deliberate upon and take lessons out of this failure story.

We have top Indian airline brands roaming in skies which have taken the world by storm. Making a brand name popular in true sense is no easy feat. It requires a great deal of vision, marketing acumen and perfect execution of strategies to realize such targets.

But the kind of air enveloping our airways for quite some time now is polluted.  Most of our airlines are struggling to remain airborne. They are struggling because they didn’t mind to spend more than what they earn and allowed to accumulate losses for long.

In other words, it’s a unique competition here among the airlines. Every one of them wants to grab larger market share. Each one is intentionally incurring losses. They are, in fact, in a mad  race of  registering losses in the hope that a competitor would suffer even bigger losses and become unviable and eventually shut its operations. Precisely, they sacrifice their financial health to oust competitors. And aviation experts rightly call it a dog-eat-dog environment.

When we talk of powerful Indian brands having international recognition, Jet Airways was figuring among 20 top Indian brands just a couple of years ago. It offered significant global competition to foreign brands in its category and is believed to have disrupted markets in many countries through its sheer services.

Now its’ fall from grace’ is a lesson to learn and a perfect case study to tailor strategies in running an airliner successfully. A summary look at the collapse of this once powerful brand reveals that the airways invested in building a brand name only to accomplish fall. The airliner gained height in skies with speed only to find itself without fuel to remain airborne.

We are now hearing a lot of reasons responsible for the fall of this giant airliner. Most popular reasons pitched are ‘owing to rising aviation turbine fuel (ATF) prices, the depreciating rupee and competitive ticket pricing’. But the given reasons are applicable to other airlines also and if reports are to be believed not a single airline in India is earning more than it is spending. The losses are believed to be running into thousands of crores of rupees.

Industry experts describe the tight situation for the Indian aviation industry as a high cost industry. To remain airborne, incurring losses makes no sense. This loss-making strategy to remain airborne is something suicidal. Aiming break even or marginal profits is the basis of a business strategy, otherwise you are into a charity operation.

The Jet collapse among other things loudly conveys that if you business is a loss-making proposition from the start, better would be not to start it. That way you are already grounded, why to fly to get grounded?

The developments leading to collapse of Jet Airways reveals that lack of investors into the airline also contributed to its fall. Here we don’t need to bank upon scientific research to find out the reason. Who will be ready to put money in a venture where profitability is not the goal? Why should investors put money in the venture to lose it? Running a business means your income should be more than your expenditure.

Last be not the least. Today, air travel is not a privilege. It’s just a means of transport. People using this mode of transport have to remain cautious while selecting an airline. A few months back, passengers traveling in the stressed Jet airliner were hurt as pilots ‘forgot’ to turn on a switch regulating cabin pressure. An airline in financial distress should be avoided as its employees, especially the pilots, remain stressed. It’s extremely high proportion risk.

(The views are of the author and not that of the institution he works for)