The Connectere brings forward the mind’s eye and panoramic view of the young writing enthusiasts on various topics

The Rise and Demise of Jet Airways


The Indian Aviation Industry is the fastest growing aviation market in the world. Increase in need to travel quickly allured by cheap rates marked its growth over the past decade. However, its fiercely competitive nature has led to the rise and downfall of various airline companies’ overtime.

Jet Airways, founded by the cashier turned entrepreneur Naresh Goyal, had a journey of its own kind. Founded on 1st April 1992, Jet Airways commenced its operations from 5th May,1993. Taking the advantage of the New Economic Policy (NEP) and Open Skies Policy by the Government of India, Mr. Goyal began the private commercial airline service in India.

The Growth and the Downfall

The growth prospects were enormous and results were instant. In 1994, Jet was the first Indian airline to operate a fleet of Boeing 737-400 aircraft. By 1996, the airline had the second highest market share of 20 percent carrying 2.4 million passengers. The government policy to allow operation of private airlines in South Asia from 2003 cleared the international path for Jet. Expanding its branches to international destinations with excellent service resulted in increased reputation and goodwill. The airline was listed in the Bombay Stock Exchange on 28th December 2004 and the IPO of February 2005 turned Mr. Goyal a billionaire in no time. By 2010, it was the largest airline in India with a market share of over 22 percent. Jet was touching newer heights year after year.

But, every perfect beginning may not have a perfect end. Despite ruling the aviation market for a long time, the airlines ceased its operations and came to a halt on 17th April 2019, after failing to secure emergency funding. The CEO Vinay Dube said, With deep sadness and a heavy heart we would like to share that, effective immediately, we will be suspending all our domestic and international flight operations.” This step resulted in instant unemployment of more than 20000 people.

The matter began with the salary cut of employees up to 25 percent due to increasing cost of operations in 2018. The company was in a financial mess in August 2018 and reported a loss in November 2018. This is not the first time when Jet experienced financial crunch. The situation was similar in 2013 when Abu Dhabi based Etihad Airways bought 24 percent stake in Jet Airways and saved it. The downward slip continued till April 2019. On 5th April 2019, Indian Oil Corporation stopped supplying fuel to the airline and by 17th April, the operation stopped completely. On 20th June 2019, the insolvency proceedings began.

The Possible Reasons for Downfall

  • Survival of the Fittest

Darwinian evolutionary theory of “Survival of the Fittest” proved to be true for Jet Airways. Jet began in the 1990’s when air travel was meant only for the upper class. Cost was never a matter of concern as quality overtook cost. It was the only serving private airlines at that point of time. When low cost airlines like IndiGo and SpiceJet stepped up, Mr. Goyal underestimated them. Jet had its high cost model based on its policy to provide proper meal with luxury services.

The 2008 financial crisis reduced the consumer demand i.e. the demand of people to travel by air. The Indian Aviation industry got a big hit as revenue declined and increased problems for Jet Airways. On the other hand, the rates of IndiGo and SpiceJet always remained low. People in India are ready to pay for their flight but they are rational enough. As a result, there was a decline in market share of Jet. The airline was subsequently, forced to reduce rates while maintaining same quality, resulting in sharp financial losses. The market share dropped to 17.8 percent in October 2017 and Jet slipped to second place behind IndiGo. Further, the company operated as a full-service airline along with Indian Airlines and Vistara which was too much for the Indian aviation market. The aggressive marketing strategy adopted by the management was the main contributor towards the downfall.

  • Atrocious Decision Making

The downfall however was not sudden and was growing overtime. Experts in the field believe that the roots to the financial troubles can be traced back to 2006. Jet purchased Air Sahara for $500 million (1470 crores at that time) which was way too much. Air Sahara was running in loss and struggling. Jet expected favorable returns from the loss-making Company and the idea terribly failed. With its acquisition came all its internal problems which increased fixed cost. It took away the most important resource for an organization i.e. free cash. The idea of Jet was to compete with other budget airlines. Air Sahara was renamed “JetLite” for the same but it was attached to labor and tax issues. Further, there was common management team for JetLite and the full service which made no such difference in cost. It resulted in loss and Jet wrote off its investment in 2015. After this deal, even small financial bumps felt large to the airlines.

The purchase of wide-body aircraft was considered to be impractical due to its low order size and high price. The first-class seats in the aircraft were retained even after not earning anything. Wide-body planes needed at least 400 seats but it had only 308 seats. The international network for these planes were not deployed properly. Jet had to lease out up to 70% of its wide-bodies to Turkish Airlines, Oman Air, Thai Airways, Gulf Air and Etihad

  • Taxation and Government Policy

The tax structure by the Indian government was higher than the global standard. There were issues on double taxation and import duty on spares which was charged by no other country. The airport charges were also high in India, as compared to global hubs. Around 35 percent of Indian aviation expenses today are related to fuel, while it is 24.2% globally i.e. 35-40% more expensive in India. The airline industry has been continuously pitching for bringing Aviation Turbine Fuel (ATF) under GST. According to Indian Oil Corporation, ATF had a hike of 9% between January and March 2019. Fluctuations in crude oil rates, continuous depreciation of Indian Rupee and taxes on import of oil increased the Per Person Cost in the aviation industry. IndiGo and SpiceJet too recorded losses but the books of Jet was burdened with debt and was unable to absorb it.

  • Mismanagement by Mr. Naresh Goyal

Naresh Goyal’s poor management styles, lack of adaptability was another reason for the downfall. Mr. Goyal rejected offers to save jet. He squandered the fairly comprehensive deal of Tata group for buying Jet Airways. He failed to take the offer of DELTA Airlines because he wanted higher share price. He always thought that he could turn around his business because of his networking skills and friends, which was wrong.

He made decisions on his own. Despite hiring the best and certified advisors, he did what he felt was best without proper analysis and discussion. He had a single management team for both the full- service airline and JetLite. Further, there was large outflow of capital. Managers were hired to a very large extent due to creation of unwanted positions. The safety training standards were increased without any need. Jet started its service in even remote areas due to its marketing strategy.

Loss of one, Gain for the other

SpiceJet has gained 43 percent of total slots vacated by Jet Airways. On the other hand, IndiGo, GoAir, Vistara and AirAsia India have gained 32 percent, 13 percent, 7 percent and 4 percent, respectively. The main reason being SpiceJet operated Boeing 737s, the same type of plane as Jet whereas IndiGo, GoAir, Vistara and AirAsia India are Airbus operators. SpiceJet also leased dozens of aircrafts to expand its operations. But the fact that Ajay Singh (owner of SpiceJet) has close association with the ruling party cannot be denied. The DGCA deregistered 50 planes of Jet and started giving speedy approval for licensed personnel like pilots and engineers required to operate these planes. The DGCA cleared the request of SpiceJet for local acquisition of 16 Boeing aircrafts in one day. These point towards the favor SpiceJet got from the government.


With Jet suspending all its flights, the future of Jet airways remains uncertain. It had it’s impact on the Indian Economy with unhealthy competition, loss of jobs and increase in air fares. For the initial weeks, talks were high of Hinduja Group joining hands with Etihad for taking over Jet Airways but it didn’t materialize. The company currently stands at a debt of $ 3 Billion and is unable to attract new investors.

The last ray of hope stands connected to Synergy group, a South American company that has expressed its desire for majority stake in Jet Airways. The question here remains is that whether the government will stick to its 49 percent clause of maximum share by foreign entities in Indian carrier or not? By starting from scratch to reaching new heights and then the downfall Mr. Goyal witnessed it all. However, the answer to the question whether Jet Airways will be revived or not remains gloomy even after 6 months.

Get The Connectere directly in your E-mail inbox !

Enter your email address to subscribe to The Connectere and receive notifications of our new content on your E-Mail


Barnum Effect- Art Of Manipulative Persuation


Is There ‘Justice’ in the Selection of Judges?

1 Comment

  1. Mallika Sarda

    Really informative. Great article ayush

Leave a Reply

Powered by WordPress & Theme by Anders Norén

Get all updates from The Connectere. Sign up below

The Connectere publishes new content daily. It ranges from articles to podcasts and news analysis. To not miss out on these updates, sign up for our email newsletter. We promise we don't ever spam. (Once you put in your email, you will need to go and confirm the subscription from your inbox once)