New Delhi: A month after distressed airline Jet Airways (India) Ltd halted operations on 17 April, there is little sign of a credible investment or emergency funding plan before the company. This has serious consequences for the company as well as the aviation industry. Here are the five ways Jet Airways’ crash landing hit the industry.
Jet Airways' halting of operations has crippled the air travel market and made ticket prices costlier, especially those booked closer to the travel date or on the date of travel. This makes flying less attractive for the price-conscious customer, though according to industry observers, this could be a short-term effect as other carriers will eventually meet the gap in capacity.
According to Sharat Dhall, chief operating officer (B2C) of travel portal Yatra.com, demand for tickets is likely to be high across all sectors as Jet’s halting of operations has coincided with the peak summer travel period. The impact on the aviation sector is huge considering that Jet had a fleet of 119 aircraft before the crisis hit the company. “We have confidence that the industry will be able to take on this increased demand with other carriers inducting more aircraft, which should help rationalise airfares that are on the higher side, particularly for last-minute travel," Dhall said. Low-cost carrier SpiceJet, for example, has announced 85 new flights from 1 April.
Jet Airways’ suspension of operations last month has left employees high and dry. With no sign of a turnaround scheme, employees are looking for opportunities elsewhere. Staff, including pilots, cabin crew and engineers, are looking for other opportunities, a senior company executive said. A month ago, senior employees had expressed willingness to continue with the company despite disruption in salary payment in the hope that a rescue plan would work out. An industry executive said the loss of job of every employee on the rolls of Jet Airways also costs five others indirectly involved in the value chain of their work. At the time of halting operations, Jet had about 15,000 workers. Jet lost its two senior-most executives — Vinay Dube, chief executive officer (CEO) and Amit Agarwal, deputy CEO and chief financial officer — earlier this week.
Airline industry growth loses steam
The decrease in available seats for sale and the surge in price have brought the growth in the air travel market to a halt in March. Airlines carried close to 1.16 million passengers in March, a paltry 0.14% growth over the traffic reported in the same month a year ago. This rate is a sharp reduction from the 18.6% growth in air traffic reported in calendar year 2018 against a year ago. Analysts said traffic growth was likely to further moderate during the current year. “With Jet Airways’ entire fleet grounded post 17 April, it would take considerable time for domestic airlines to make up for the extinguished seat inventory," Care Ratings Ltd said in a note on the aviation industry on Tuesday. However, the silver lining in the cloud is that with reduced competition and improved airfares, operating margins for airlines would improve during FY20. “We do expect all airlines to report operating profits during FY20," according to Care Ratings.
Loss to banks
With Jet’s revival remaining uncertain, the company’s lenders led by State Bank of India have little means of recovering their dues. At the end of 31 March 2018, Jet’s total debt was ₹5,285 crore, with trade payables of another ₹6,400 crore. This is likely to have gone up by now. Being a services company having less physical assets, banks and operational creditors have little chance of recovering their dues.
Also read: Hope floats for Jet as Etihad submits bid for a minority stake
Loss to allied industry
With Jet’s collapse, airport operators and fuel suppliers have lost a big customer. Jet retreating from the market means airport operators are denied of landing and parking charges and other rental revenue from the airline. These charges account for roughly 10% of the ticket price, the bulk of which is on account of fuel.