At the end of last week, I wrote about JetAirways teetering on the brink of collapse. With the airline operating just 5 planes and waiting for lenders to release emergency funds to keep the airline afloat, an agreement was not reached on Friday.
Yesterday, a board meeting took place to further discuss lending opportunities and the meeting ended ‘unresolved’ as well. Lenders were extremely divided on how and whether to relieve the financial burden from the cash-strapped airline.
Well today, the once-mighty JetAirways made an announcement that they would be suspending all flights after failing to secure funding.
WHO I FEEL BAD FOR
In the middle of all this mess are the employees. JetAirways has nearly 20,000 employees and it has been reported that many of them have not been paid in months. In fact, nearly 400 pilots have left during this crisis and yesterday alone, 20+ pilots left and began working for low-cost carrier IndiGo.
Unsurprisingly, rival carriers to JetAirways have increased their fares substantially and some airlines (e.g. Air France and KLM) have increased the number of flights to Mumbai (BOM) to “assist” the passengers affected by Jet Airways’ cancellations.
It’s always unfortunate when an airline (or any business) ceases operations because at the heart of a business are honest people just trying to make a living. Regardless of any good or bad business decisions, 20,000 people are now unemployed and that’s sad.
It’s difficult to pinpoint where the airline went off track. I assume, in hindsight, it was a combination of factors that led to this day.
India is a major importer of oil and fuel is the biggest cost burden to an airline. Additionally, India’s currency, the rupee, has recently hit record lows. With oil prices surging world-wide and the currency plummeting, it doesn’t make for a good equation.
With that being said, I find the economics behind airlines exciting. On one hand you have a flagship carrier (e.g. JetAirways) cancelling operations because they, simply, don’t have money to operate. On the other hand, you have low-cost carriers (e.g. IndiGo and SpiceJet) that have endured and continue to operate despite having the same extraneous pressures (i.e. plummeting Rupee and high oil prices).
What are your thoughts about JetAirways? Why do you think the low-cost carriers have been able to endure? Or will they be the next to fold?