Jet Airways Crisis | Burning Issues | PDF Download

WHAT HAPPENED RECENTLY?

DOWN FALL OF JET AIRWAYS

• Debt of over Rs 8,500 crore
• When the banks rejected the airline’s request for emergency funding of Rs 400 crore on Tuesday, unable to pay for fuel and other services, it had to ground its planes, at least temporarily.

MAJOR CRISIS

• Jet Airways management has asked the government to release Rs 175 crore to pay one-month of salary to its staff. THE PROBLEM
• Boeing 777 planes, can be kept as collateral Jet Airways has defaulted on a loan of EXIM bank through which the aircraft were bought. This is the reason why Indian banks are unable to treat the planes as collateral.

EXIM BANK

• Export–Import Bank of India is a finance institution in India, established in 1982 under Export-Import Bank of India Act 1981.
• A catalyst and a key player in the promotion of cross border trade and investment.
• Headquarters Mumbai, India

HOW MUCH MONEY DOES JET AIRWAYS NEED?

• Getting the grounded airline back in air, and clawing back its lost market share, will require at least Rs 7,000 crore.
• Jet Airways’ engineers, pilots and senior management have not been paid salaries since January and the dues till March reportedly add up to Rs 600 crore.

WHO CAN RESCUE JET AIRWAYS?

• Banks, already burnt by Kingfisher Airlines in the past, have left it to potential investors to revive the airline by infusing fresh capital.
• the lenders issued a statement saying that “the best way forward for the survival of Jet Airways is to get the binding bids” from the investors that had submitted expressions of interest

PARTIES WHO SHOWED INTEREST

• The shortlisted bidders – Etihad Airways, Jet’s largest shareholder, TPG Capital, Indigo Partners and National Investment and Infrastructure Fund (NIIF) – have been issued bid documents on April 16. However, if the stake sale does not go through, the airline may even land in bankruptcy court.

REASONS FOR JET AIRWAYS COLLAPSE

• Over the last four years, India’s aviation market has grown at a yearly average rate of 20%, among the fastest in the world.
• More and more Indians are flying; paradoxically though, nearly all the major players are in dire straits financially.

ISSUES

• Reckless competition –While it is true that fuel costs, which account for about half of the expenses of running an airline, have been difficult to manage, the fact is that reckless competition is responsible for the sorry plight of the industry.
• Low Margins – Margins in the airline industry are wafer-thin in the best of times and the combined effect of rising fuel prices and the inability to pass them on to consumers due to competition has proved to be a deadly cocktail.

AVIATION TURBINE FUEL (ATF)

• High cost of Aviation turbine fuel (ATF) including the high tax and surcharges

AVIATION TURBINE FUEL

AVIATION ON INDUSTRY CRISIS

• It was in October 2012, when Kingfisher Airlines shut its operation after a strike by its employees.
• Air Deccan and Air Sahara before that
• Sahara had a good product but was in a financial mess. Jet Airways bought the Sahara airline for Rs 1,450 crore and converted it to a low-cost carrier under the JetLite brand.

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