When Naresh Goyal decided to set up Jet Airways, his thinking was clear. It should have the Swiss precision — with planes flying on time — along with German engineering, American technology, Asian services and Indian hospitality. In the beginning, the airline managed to achieve all this and more, and commanded an overwhelming share of the domestic air travel market.
Such was Jet’s impact that many frequent flyers were willing to forego the free limousine service that a competing domestic airline provided to business class passengers in a bid to woo them .
Frequent flyers recall that business class passengers on Jet were served by cabin crew who wore gloves, the menu was changed frequently, and imported cutlery was used in the premium class even on domestic flights. All this won both laurels and profits for Jet Airways. An official who worked with the airline till mid-2000 recalls that during the early years, Jet’s business class cabin filled first, and then the back of the aircraft.
Wrong decisions
Expansion for the airline followed. Wanting to make use of the first mover advantage of flying abroad, Jet became the first Indian airline to set up a hub abroad — in Brussels in 2007. In 2016, it decided to shift this hub to Amsterdam.
Jet was also among the first airlines to benefit when the government reversed its policy and allowed foreign airlines to have a stake in domestic airlines. Jet sold a 24 per cent stake to Etihad Airways for ₹2,050 crore.
In hindsight, many say the decisions to shift out from Brussels and selling a stake to Etihad were strategically wrong. “When Jet moved to Brussels, that airport was bustling. Connections were seamless. Why shift to a busy airport like Amsterdam?” a former employee said, adding that while Etihad may have financially bailed out the Indian carrier, Jet paid a heavy price. The employee recalled that frequencies of several domestic flights were curtailed.
Sahara-buy, ‘a bad move’
Another not-so-smart move — as pointed out by former employees and also those working with Jet’s competitors — was the airline’s decision to acquire Air Sahara. In 2007, Jet Airways acquired Air Sahara for ₹1,450 crore. Former officials say the deal went through despite some senior officials of the airlines having misgivings about the buy-out.
Dubbing it one of the worst decisions that the management took, a former employee, who claims to have been a part of the deal-making, said: “There was no due diligence done. The cultures of the two companies were totally different.”
Many aircraft types
The list of bad decisions continues. According to some, Jet’s decision to go in for a multiple-aircraft fleet from the original single-aircraft fleet boomeranged, as this changed the operating economics of the airline. Jet started with a fleet of Boeing 737 aircraft, but went on to have a fleet of Boeing, Airbus and ATR aircraft. This meant that the airline needed different sets of engineers and pilots, among others, to operate its fleet.
Cost factor s missed
Then there is also the issue of Goyal’s management style. Former employees give an example of how Goyal decided to negotiate with various stakeholders — including pilots and cabin crew — directly, rather than through senior management.
A former Jet Airways’ senior management person recalls how this led to the company policy on the distance and route of the pick-up car for cabin crew being changed, which led to the transport bills shooting northwards.
Initially the airline provided free transport for cabin crew only within greater Mumbai limits, but post the meeting that changed crew pick-up going to places which were beyond the greater city limits, the former official recalls. Conceding that the airline was a leader in choosing the best in class — for instance, being the first airline in India to start operations with the Boeing 737 400 which offered more seats — an official of a rival airline said that nobody seemed to be looking at costs at that time.
Real rivals
“Jet believed that low-cost airlines cannot survive in India, as they operated from the same airports which were used by full-service airlines like Jet Airways. In some ways, their belief was strengthened because Air Deccan went down. But they probably failed to fully understand the changing dynamics of the industry, and that somebody who managed costs and grew slowly could survive even when the airline was low-cost,” the official said.
Some say that the senior management’s fear of more competition and its steps to prevent more players from coming into the Indian market also cost the airline dear.
“The Jet management believed that the threat was from full-service airlines, while the real threat was from low-cost airlines,” said another former official pointing out that when the airline finally decided to modify and become low cost by rebranding Air Sahara first into JetLite and then Jet Konnect it only managed to confuse passengers,” said a former employee.
To buttress their argument, former officials point out that when Kingfisher Airlines, a full-service carrier, went down, the real winner were low-cost airlines, such as IndiGo and SpiceJet, which were able to attract more fliers rather than Jet Airways. Another former official gave the example of how when Jet Airways was started, the pilots, many of whom were from Indian Airlines, were hired on monthly salaries of ₹80,000, almost 40 per cent more than what they were drawing earlier. But within a year, their salaries had touched ₹1,25,000 to match what another private sector carrier was paying at that time.
All these factors collectively led to the situation in which the airline currently finds itself.
Struggle to stay afloat
The last few years have seen the airline run into losses, its image taking a beating with lessors taking back aircraft as Jet does not have money to pay for them, and murmurs rising that Goyal will have to step down if the airline is to keep flying. Given that Goyal was instrumental in starting and making a success of the airline, most of the blame for its current state is also being placed at his doorstep.
In fact, so bad is the situation that a consortium of banks is set to become the largest shareholder in the airline that Goyal founded. The terms at which the consortium is negotiating are harsh, as the lenders have the option of converting their debt to equity at ₹1, when the book value per share of a company is negative.