Page 17 - AAA NOVEMBER - DECEMBER 2018 Online Magazine

IN A DOWNWARD SPIRAL

Indian full service carrier Jet Airways is struggling to maintain level flight

Atul Chandra

ndian full service carrier Jet Airways is the situation by saying, “The opportunity is staggering because
facing the greatest crisis that the airline of our highly underpenetrated aviation market with a fast-grow-
has seen in its 25th year of operations. The ing economy and a growing population. But the challenges are
Iairline had commenced its Indian opera- equally staggering, as airlines battle for market share, not prof-
tions in May 1993 with a fleet of four leased itability, by dumping capacity into a market at unprecedented
Boeing 737 aircraft and successfully navi- levels, enabled by fare regimes that are unsustainable. You are
gated the vagaries of the Indian civil aviation seeing this clearly play out as each of the airlines report results
environment to become a globally respected for the second fiscal quarter.” The carrier has been hit hard by
airline. The Indian full service carrier has now fuel prices which have seen a sharp increase with Brent price for
been hit hard by rising fuel prices which have Q2 FY2019 at US$75 per barrel. This was 50 percent higher per
led to ballooning debt and cut throat com- barrel as compared to US$50 per barrel in the same period last
petition by Indian Low Cost Carriers (LCCs) year. Aircraft fuel expenses, aircraft and engine lease rentals,
have made it impossible to increase air fares. employees remuneration and benefits and aircraft maintenance
The airline was further buffeted in December costs make up approximately 60 percent of the carrier’s total
by the exit of Nikos Kardassis, a former CEO expenses, with aircraft fuel expenses alone making up 50 per-
with the airline, who was brought back in an cent of the former.
advisory capacity in an attempt to achieve
a turnaround. The airline is saddled with The company has engaged the services of experts to help in
approximately US$1.16 billion of debt (as of its turnaround plan, encompassing operational improvements,
Sept 30), which includes US$250 million building efficiencies and enhancing the liquidity status of the
worth of aircraft debt. UAE’s national carrier company. These measures include sale of aircraft, moneti-
Etihad Airways had earlier picked up a 24 sation of the company’s stake in Jet Privilege Private Limited
percent share of the airline in 2013. (‘JPPL’) and fresh liquidity infusion into the airline. Jet Airways
has already engaged the services of investment bankers for
Stemming the Tide monetisation of a stake sale in JPPL which has 8.5 million mem-
Speaking about the market conditions bers and the equity infusion of the company. To help with the
during a recently concluded investor call, Jet turnaround initiative, expert consultants are now working to help
Airways CEO Vinay Dube aptly summed up the airline manage its cost and revenue reduction initiatives.

ASIAN AIRLINES & AEROSPACE November/December 2018 | 17