Jet Airways, one of India’s prominent airlines, which holds more than 15 percent of market share in civil aviation has been grounded. The company employed more than 16,000 people and was the third largest air carrier in the country. Over the years it has accumulated a net debt of 7,299 crore rupees and net loss of the company stood at 13,980 crore rupees as of December 2018. The company asked the lenders who control the board for funds but the plea was rejected. The company was started in the mid-1990s and acquired by Naresh Goyal a few years later. It led the private sector in the aviation industry for years.
The lenders expect new investors to acquire the company and the operations might restart after that. Jet’s strategic partner Etihad Airways, private equity firms TPG Capital and Indigo Partners and government-backed National Investment and Infrastructure Fund (NIIF) are in the race to acquire a controlling stake in the troubled company.
The company operated 600 daily flights a few months ago and on last day it operated only 17 services with five plans. The company has a dramatic rise and changed the rules of the aviation industry in the last two and a half decade. It began operations as taxi operator in 1993 and was granted scheduled airline status in 1995. Naresh Goyal, the person who became synonymous with the airline acquired 40 percent stake in the company from Gulf and Kuwait airway in 1997. In 2004, Jet became the first private company to operate an international flight. It broke the monopoly of state-led companies like Air India and Indian Airlines. The company launched IPO in 2005 and acquired Sahara air in 2007.
The downfall of the company started after acquiring debt-ridden Sahara Air, which proved a bad decision. In 2013, it sold 24 percent stake to Etihad Airways. However, this could not save the debt-ridden company and its market leadership continued to weaken. The entry of other low-cost airlines like IndiGo and SpiceJet further dampened the chances of revival. Jet Airways could not standby the competition posed by other efficient low-cost airlines in the market.
Finally, the company has ended its operations. “Late last night, we were informed by SBI, on behalf of the consortium of Indian lenders, that they are unable to consider our request for interim funding of Rs 983 crore. Because no emergency funding from the lenders or any other source of funding is forthcoming, it will not be possible for the company to pay for fuel or other critical services to keep operations going. Consequently, with immediate effect we are compelled to cancel all international flights as well as our domestic flights,” said Chief Executive Officer Vinay Dube.
Earlier the government had ruled out any intervention in the crisis-ridden Jet Airways. Many experts expected the government to help out the company. However, the Modi government is firm that the businesses should work on market principals and if a company is not able to make profits, it should exit from the business. The era of spoon feeding the private companies in the name ‘strategic importance’ is over. Now if a company is not able repay its dues, the management will be transferred to the lender and the company will be on his/her mercy.
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