Updated: Sep 18, 2019
(Jitesh Manwani is a business coach and consultant based in Indore. Also in his long span of career, Jitesh has been a Corporate Trainer, Motivation Speaker, Keynote Speaker, Leadership Management Consultant, Life Coach and also a Career Coach in Indore)
Jet Airways, one of the biggest airlines which had more than 20,000 people working is an Indian international Airline. It is based in Mumbai and more than one lakh people were dependent on these airlines for their livelihood. It was started in 1993 and provided world class services to its customers. It had a new identity with global branding which included new aircraft and better seating. It was one of the prestigious airlines in India and claimed to be the only one profitable privately owned airline in those days. The revenue of Jet airways was increased to 32% in 1997. It became India’s largest private carrier and started flying to 20 destinations. By the beginning of 2000, it served 57 destinations in 15 countries .
Reasons for Failure of Jet Airways
In 2004, market share of Jet airways was 44% which came down drastically to 15% in 2018.During that period many new players like Go air, Spice Jet and Indigo entered the market. Because of many players, there was a price war in the aviation industry and as per the theory of economics consumer, producer and government should always benefit in this war but only consumers were getting benefited in case of telecom and aviation industries and producers and industry were running to losses, which made huge impact on Jet airways.
1. Whatever the company purchased was overpriced when compared to other airways and its financial troubles started in 2006 when it purchased Air Sahara, The CEO had acquired the airlines with inflated price with a hope to increase the domestic market. But the company was not able to get the expected returns and suffered losses and most of their investments went off for this acquisition.
2. Experts also say Jet Airways was called full service airline and they underestimated the demand for low cost carriers which was the reason for the losses. It was not able to compete with Spice Jet, indigo and go air. The facilities provide by all the airlines are more or less the same. Jet airways services focused more on corporate and ignored customers who were price sensitive. There were many successful low cost airlines which attracted customers with their pricing. Jet was not able to attract customers when they offered a dip in their price and even after adding new routes
3. Pilots of Jet airways were treated in a royal way and were paid more with high perks when compared to other airlines. Employees were provided with top class amenities. The company always used to spend more than what they earned. The salary provided by the employer should not be too much or too less. It might differ 10% from Industry standard but not more than that. If you want to know how to decide a better package of your team, click on the below link
4. Other airlines used to have one or 2 varieties of planes to minimize licensing cost, maintenance cost and training cost of the pilots but jet airlines used to have 5 to 6 varieties of planes. They used to buy planes where ever there was high commission. The founders of these airlines were commission agents. They were actually a travel agent who used to earn profit from commissions.
5. Fluctuations in global crude oil prices made a huge burden on the aviation industry as our country is a major importer of crude oil. All the airlines suffered and Jet Airways suffered the most.
6. There were many great people who were directors of Jet airways but Mr.Goyal never used to give management to anyone and experts blame that the loss of Jet Airlines was because of poor management style and say that they lacked a concrete business model and confused both customers and investors. Bad investments and lack of transparency were also other reasons for Jet Airways.
7. Jet airlines failed to attract investors when it was running in financial losses. It also failed to manage its balance sheet. Jet’s attempt to pump money with Tata also failed. It got about 20,000 crores finance from SBI aganist12,000cr assets and finally SBI took over the airlines.
Real profit and book profit are always different. If you want to have a clear idea about profits shown in the books and real profit earned by the company, just click the below link
Jet airways also had a private company called Jet Air Pvt.ltd, which took care of cargo booking and cargo shipping. The profits earned in this company also used to go to Jet Airways. There was a time where jet Air pvt ltd was supposed to purchase Jet airways!
Learning from Jet Airways
Business is a game of intentions, if you want to earn more money in less time, then people will become greedy and can go to any extent to earn money. Due to bad intentions of CEO, the company runs into losses and with company all the allied people also suffer due to this.
The motto of the business is to make profits so that they can pay good salary to their employees, pay tax to the government and show good return on their investments to their investors. But if focus is only to improve your personal wealth then business will always run in losses. If the business is genuine and pay taxes and pay employees and show returns to investors, the company will gain the trust of people and create a brand in the customer’s mind. People always pay for the brand. Brand is not limited to the name of the company, logo or the people who advertise for the product but it is much bigger than that. It includes right from the company’s name till the service which the customer receives from your company. In short it is the way how the customers recognize your business. We can see many individuals who are ready to pay more for the brand name. To know the importance of branding and its benefits, check the below link
These days with advanced technologies, the business you run should be transparent, honest, committed, straight forward and innovative. It might be difficult to earn profits by following the above principles but it is not impossible. With cut to cut competition it is very hard to convince customers to buy your products or services. You should know how to impress your client. Few tips on how to impress a client are given in the below link, check the link which will help you have an understanding to deal with people as we have to face people and it is important everywhere and not limited only to individuals who run business.
From this case study, it is very clear that how a successfully running business can end up in losses. The motto of any business should be to earn profits but not to earn personal wealth. If a business pays tax to the Government and gives good result to the investors, then they will automatically win the trust of the customer and build a brand.
There were many companies which also earned profits in this industry. Indigo is one of the low cost airlines in India. It is headquartered at Gurgaon. It operates flights to almost58 domestic destinations. It offers economy class seating to its customers and to keep the price low it will not provide any complimentary meals on its flights. It was started in 2006 and now it occupies 48% domestic market share.
Click on the below link if you want to read the success story of Indigo and understand how the vision of two entrepreneurs has made the airlines more successful,
There are many things that you can do to improve your business when it runs in losses. There can always be a scope for improvement. You might have very good experience or running successfully for many years but basing on external factors the profits of our business may change. You should always stay connected with people of your field or industry and build mutual beneficial relationship. People with good network can always prosper well .To know about the importance of networking check the below article which helps you to connect with people and build a better network.