Jet Airways suspends operation: A peek into the past of one of the pioneers of India’s private aviation industryhttps://indianexpress.com/article/business/aviation/jet-airways-crisis-bailout-naresh-goyal-debt-etihad-sbi-history-staff-5680965/

Jet Airways suspends operation: A peek into the past of one of the pioneers of India’s private aviation industry

As low-cost airlines made their way into India's civil aviation sector in the 2000s, Jet Airways decided to lower the fares drastically. The losses and the resulting debt grew throughout the past decade, and Jet Airways began defaulting on loans.

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Jet Airways aircraft at the Chhatrapati Shivaji Maharaj International Airport in Mumbai on Tuesday. (Express photo: Pradip Das)

Jet Airways came into existence when PV Narasimha Rao-led government, as a part of its much larger economic reforms, opened up the aviation industry to private players in 1990s. The Naresh Goyal-led airline was founded as one of the earliest private airlines in India’s aviation history as it operated its maiden flight from Mumbai to Ahmedabad in 1993.

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It became a deemed public company in 1996, only to convert as a private corporation five years later in 2001. The airlines reconverted into a public company in 2004 and continued to be so ever since.

Naresh Goyal
Naresh Goyal

When and how Jet Airways began to court trouble?

In the wake of an array of low-cost airlines making their way into India’s civil aviation sector in the 2000s, Jet Airways as a part of its market strategy to compete against the new players decided to lower the fares drastically. The fares were often below the input costs that the airlines faced. High taxes on aviation fuel further soared the losses faced by the airline in order to drive out the competitors.

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The losses and the resulting debt grew throughout the past decade, and Jet Airways began defaulting on loans. As a result, the crisis peaked to a point when the airlines ran out of funds to pays its staff.

What is the present situation?

Cash-strapped Jet Airways Ltd Wednesday announced a “temporary suspension of operations” after the consortium of banks led by SBI rejected their request for emergency fund infusion. The consortium refused to provide Jet Airways with the Rs 400 crore in emergency funds that the airline was seeking to stay operational.

Jet Airways employees hold placards and banners during a protest demanding to “save Jet Airways” at the Indira Gandhi International Airport in New Delhi. (Photo: Reuters)

The last flight will be from Amritsar to Mumbai at 10.30 pm tonight. The airline has already suspended all its international operations. “Since no emergency funding from the lenders or any other source is forthcoming, the airline will not be able to pay for fuel or other critical services to keep the operations going. Consequently, with immediate effect, Jet Airways is compelled to cancel all its international and domestic flights. The last flight will operate today,” the airline said in a statement.

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With pressure mounting and staffers holding protests against Jet Airways, the airline desperately requires funds from either its lenders or by the central government itself. Etihad Airways, a prominent stakeholder in the airline’s shares, has refused to put more funds in the crisis-hit company.