oppn parties Jet Airways: Nosediving Into Uncertainty

News Snippets

  • Rain deficit seen in India in january for the first time in 5 years
  • Heavy snowfall disrupts life in J&K, Himachal and Uttarakhand
  • Centre says Teesta Setalvad's politics is divisive and opposes her plea on conversion law
  • The ASI who shot and killed Odisha health minister Naba Kishor Das might have done so to extract revenge as the minister had rebuffed him
  • Law minister Kiren Rijiju says pleas against BBC documentary are a waste of court's precious time
  • Self-styled godman Asaram held guilty of rape and sodomy. he is already serving life term for another conviction in a rape case
  • Supreme Court to hear pleas against the ban on BBC documentary on Gujarat riots and Prime Minister Modi
  • Adani Enterprises FPO subscribed just 3% in 2 days
  • Hindenburg slams Adani response to its report, says nationalism cannot be an excuse for fraud
  • Gold hits new high in India: traded at Rs 57149 per 10 gms
  • Adani Group companies continue to bleed although Adani Enterprises reversed the trend to gain on Monday
  • Markets end positive after a highly volatile session on Monday: Sensex gains 169 points to 59500 and Nifty 44 points to 17648
  • Satellite images show significant increase in night lights in India with some states growing at 43% in 10 years and some even 400%. Economists consider this as indicator of growth
  • Bombay HC has ruled that there will be no parole for TADA victims in Maharashtra
  • Courts handed out the death sentence to 165 accused in 2022, the highest in 40 years
Investors lose Rs 5.6 lakh crore as Adani Group companies lose 29% market value in three days and the carnage is continuing
oppn parties
Jet Airways: Nosediving Into Uncertainty

By A Special Correspondent
First publised on 2019-04-19 08:29:33

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.