Jet Airways woes: India aviation boom flies into air pockets
April 23 2019 10:34 PM

Jet Airways, once ranked India’s biggest airline by market value, is stuck in air pockets.
The carrier has grounded its fleet, staff salaries are delayed, it’s missed payments to banks and leasing companies, and a bailout plan proposed by its lenders is in limbo.
Jet Airways is the second local carrier to ground its entire fleet in the past decade. A severe cash crunch had pushed Vijay Mallya’s indebted Kingfisher Airlines to ground its planes in 2012.
Kingfisher never flew again and Mallya is still fighting his extradition to India from London.
The crisis at Jet Airways that risks 23,000 jobs has come at an exceptionally sensitive time for Prime Minister Narendra Modi who’s seeking re-election in the ongoing national elections, amid concerns on rising unemployment.
The Modi administration has in the past few years cracked down hard on India’s delinquent borrowers to repair the books of banks that currently have the world’s worst soured loan ratio.
Jet, which broke the monopoly of state-run Air India in the early 1990s, has been in decline since budget airlines started offering ultra-low fares that hurt profits and led it to pile up more than $1bn in debt. It also has unpaid dues to aircraft-leasing firms and employees including pilots, who have been agitating over non-payment of salaries.
Jet’s founder Naresh Goyal resigned as chairman of the ailing airline last month, caving in to pressure from creditors. Goyal, who started in aviation as a ticketing agent, rose to be among the nation’s elite after Jet became India’s premier full service carrier.
Indian carriers, including Jet, have seen their profits hurt by the world’s highest jet-fuel taxes and a price war worsened by the entry of low-cost, no-frills airlines such as IndiGo and SpiceJet that offered dirt-cheap fares with lower overheads.
Foreign carriers from Malaysia’s low-cost AirAsia Group to Singapore Airlines and Jet’s minority shareholder Etihad, have all learnt how hard it is to make money in Indian skies.
Air India, the state carrier, has been propped up on bailouts from the exchequer for years. AirAsia, which entered in 2014 with a vow to break even in four months, is still nowhere close to its goal.
Vistara, Singapore Air’s joint venture with the Tata Group that started in 2015, has yet to make any money. SpiceJet had almost collapsed in 2014.
The only exception in the sector is Indigo, which has reported annual profits since 2011 and whose stock has soared 33% this year. Spicejet, which has been on the mend, has also advanced as it leases more aircraft and starts more flights on the New Delhi-Mumbai route.
Make no mistake, India’s aviation sector is an investment riddle. It’s the world’s fastest-growing aviation market that has seen 54 consecutive months of double-digit percentage passenger growth. But it’s notoriously difficult to make money in.
The clock, for sure, is ticking for one of India’s most visible companies.
As Jet Airways’ lenders race to find an investor for the debt-ravaged airline, suitors will weigh the sector’s prospects against India’s high jet-fuel prices and a crushing fare war.

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