oppn parties Jet Airways: Nosediving Into Uncertainty

News Snippets

  • In reply to a question in Parliament, the government says it is empowered to lawfully intercept, monitor or decrpyt information stored in a computer resource in the interest of sovereignty or integrity of India
  • Police stop a 12-year old girl on her way to the Sabarimala shrine
  • In Karnataka, the JD(S) indicates that it might support the BJP government if it falls short of numbers after the bypolls
  • Congress pips the BJP in local body elections in Rajasthan, winning 961 wards to the BJPs 737
  • After Airtel and Vodafone-Idea, Jio also indicates that tariffs will be raised from December
  • Sources in Shiv Sena say that they might revive the alliance with the BJP if it offers the 50:50 deal
  • A miffed Sanjay Rout of the Shiv Sena says that it will take "100 births" to understand Sharad Pawar
  • Mobile operators Vodafone-Idea and Airtel decide to raise tariffs from next month
  • Sharad Pawar meets Sonia Gandhi and says more time needed for government formation in Maharashtra
  • Justice S A Bobde sworn in as the 47th Chief Justice of India
  • Supreme Court holds hotels liable for theft of vehicle from their parking area if parked by valet, says "owner's risk" clause is not a shield from such liability
  • Finance Minister says she is receiving feedback from many sectors that recovery is happening as there is lower stress
  • Sabarimala temple opens, but police bar the entry of women below 50 years
  • Finance Minister Nirmala Sitharaman says Air India and BPCL to be sold off by March
  • Media person Rajat Sharma resigns as DDCA president
Two Muslim litigants in Ayodhya refuse to accept the Supreme Court order, say review petition might be filed
oppn parties
Jet Airways: Nosediving Into Uncertainty

By A Special Correspondent

For the first time in recent memory, lending banks acted with great sagacity and hard-nosed business sense by refusing to provide emergency funds to keep the sinking Jet Airways afloat. If they had provided the funds, it would have been a classic case of throwing good money after bad. There is little chance of the lenders recovering their debt without taking a substantial haircut (reports suggest it could be in the region of 80%). In this scenario, lending Rs 400cr of emergency funds would have been extremely foolhardy.

The troubles being faced by Jet Airways are a result of mismanagement. It is common knowledge that margins in India’s aviation industry are wafer-thin. Was there any justification then for Jet to make selling and general expenses of 15-17%, especially when Indigo was doing a better job than it by spending just 2-3% under those heads? With the price of aviation fuel making up nearly half of their costs and with airlines having no control over it, they have to curtail other expenses to shore up margins. The Centre can also help by reducing some levies and airport charges which are among the highest in the world.

The lenders have called for Expression of Interest (EOI) from prospective bidders to offload their investment. But one feels that the condition Jet is in, there will be little or no interest from buyers and even if they show interest, it will be at a price that will not be acceptable to lenders. The lenders made a huge mistake by letting things come to such a pass, especially when the financial troubles of Jet were known as early as from September 2018. As time will pass, it will become more difficult to find a buyer as Jet’s slots and other benefits will be passed on to other airlines, making it even less attractive to suitors.

Not many tears need to be shed for the collapse of Jet Airways. Some of the employees will obviously face hardships but the planes will be leased by other airlines and the slots will be reallocated. After a period of uncertainty and jump in ticket prices, things are likely to return to normal. The only fear is that if Indigo, which already has a 43% market share, gets to dominate the skies, it will kill competition and fliers will suffer. Hence, it is imperative that the government stops subsidizing Air India with the hard earned money of the taxpayers and relaxes the norms for privatizing it. Further, to prevent more such collapses, airlines should take a more pragmatic stand on ticket pricing to bring margins to a level where they can sustain operations.