The Rise and Fall of Jet Airways: A Comprehensive Analysis
This is a long story but I will keep it short and hope you do your own research to get the whole picture.
The Competitiveness Challenge
Jet Airways was once a dream aircraft carrier in India. However, it now bears the largest debt in the airline industry, barring Air India. Jet Airways was a full cost carrier, meaning the cost of operations was high, leading to high ticket prices. This was not an ideal strategy for the price-sensitive market in India. In the early days, there was no other option for air travelers but to pay the hefty prices for air tickets.
The Emergence of Low-cost Carriers
However, the game changed around 2005 when low-cost carriers like Indigo and SpiceJet started dominating the domestic market. People realized that for a 2-hour flight, free food and entertainment, which were included in the high ticket prices, were not necessary. This shift led to a significant loss of market share for Jet Airways, despite their efforts to maintain a high profit margin.
Strategic Mistakes
Jet Airways committed two significant strategic blunders that contributed to its downfall. In 2007, to compete with low-cost carriers, Jet purchased Air Sahara and launched Jet Lite. However, Jet lacked the experience to operate an LCC, making Jet Lite's operation challenging and costly.
Another major strategic mistake was Jet's purchase of 75 narrow-body 737 aircraft for nearly $9 billion in 2018. The airline was already facing financial issues, and financing such a large order was a significant challenge.
Regulatory and Market Changes
The Indian government's 5/20 rule, which required an airline to be in operation for 5 years with 20 aircraft to operate internationally, also posed a challenge to Jet Airways. This rule was modified to allow new low-cost carriers to operate internationally, forcing Jet Airways to face competition in areas where they previously dominated.
Furthermore, Jet Airways' diverse fleet consisting of Boeing and Airbus planes resulted in high maintenance and operational costs. Over the years, many CEOs came and went, and there was a lack of a proper management team to address these challenges effectively.
The Legacy of Jet Airways
Despite its many failures, Jet Airways made a significant mark in the aviation field. It was the first private airline to take on public carriers like Air India and emerge victorious. Jet also pioneered international operations by a private airline in India. Its journey, though unfortunate and sad, paved the way for the growth of private airlines in the Indian aviation industry.
In conclusion, the fall of Jet Airways is a result of a combination of internal strategic missteps and external market and regulatory changes. It serves as a cautionary tale for other airlines and a testament to the resilience and adaptability required in the aviation industry.