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Home / Opinion / Columns /  Opinion | ‘Black box thinking’ and the descent of Jet Airways

Britain’s de Havilland Comet I was the world’s first commercially produced jetliner, but it was grounded after a number of mysterious crashes in the 1950s. A detailed, massive investigation identified the flaw: Hairline cracks from the plane’s square windows spread across the fuselage and caused the whole machine to come apart. That’s why planes now have oval windows. The more significant consequence of the investigation, though, was the installation of a near-indestructible flight data recorder, the black box, in every aircraft. The aviation industry is remarkable for its good safety record—and that’s because mistakes are learned from, rather than concealed.

It’s the kind of thinking that has entered management parlance—the term “black box thinking" was coined by Matthew Syed. The idea that makes black box thinking so compelling is: Success is possible only when we confront mistakes. It is about creating cultures that enable organizations to learn from errors, rather than feeling threatened by them. A little bit of black box thinking could have helped Jet Airways founder Naresh Goyal course-correct at any point in his journey and, perhaps, avoid the descent of the once-revered airline into near bankruptcy.

“A black box records thousands of pieces of data per second, including the pilots’ conversations in the cockpit, making it easier to determine the exact cause of a crash. No industry takes mistakes more seriously than airlines…With each crash, future flights became safer. This principle is an exquisite mental tool that can be applied to other areas of life—and lets call it black box thinking," writes Rolf Dobelli in his book, The Art of the Good Life. It’s ironical that Goyal didn’t adopt black box thinking despite operating in the industry. First, Goyal refused to change his management style, which was often criticized. There were enough warning signals: in five years, Jet had seven CEOs, including three acting CEOs.

Steve Forte, who led Jet in the early 2000s, told the Economic Times if Goyal continued in the cockpit, “the airline will burn through any new cash infusion". Lenders and Jet’s partner Etihad said Goyal giving up control was a pre-condition to supporting the airline. Going by black box thinking principles, when people don’t accept errors, they don’t even know they have made one.

Second, experts posit that signs of Jet’s trouble showed soon after it acquired low-cost carrier (LCC) Air Sahara in 2007. Goyal bought the down-and-out airline for a huge price, all to ensure that Jet remained the only private airline to fly abroad.

Goyal’s idea to compete with IndiGo and Kingfisher proved to be disastrous. Dabbling in both full service and LCC markets, Jet couldn’t integrate Air Sahara, which resulted in confusion among customers and drained management resources. “Success is not just dependent on before-the-event reasoning, it is also about after-the-trigger adaptation," says black box thinking.

Third, Goyal could not learn from the mistakes of Kingfisher Airlines, which was a live case study on what could go wrong. According to a 3 October Business Today report, a couple of months before the airline was almost grounded, the carrier struggled to pay its 7,000-plus employees. It had to cancel flights after pilots reported sick to protest non-payment of salaries. When the Vijay Mallya-run airline was grounded, it had an outstanding debt of 7,000 crore, and a negative net worth of 12,919 crore.

Compare that to Jet Airways. It has also been reportedly defaulting on employees’ salaries. Jet Airways has a debt of over 8,200 crore and needed to make repayments of up to 1,700 crore by the end of March, besides a negative net worth of over 7,000 crore. Following a trajectory similar to Kingfisher should have set the alarm bells ringing and avoid repeating mistakes which were internal and under their control. “If we wish to fulfil our potential as individuals and organizations, we must redefine failure," says black box thinking.

To be fair, there are factors beyond control—changes in external environment such as price of jet fuel and rupee depreciation. Aviation business is cyclical, which makes airlines prone to bankruptcies every few years. To quote Warren Buffet: “The worst sort of business is one that grows rapidly, requires significant capital to engender growth, and then earns little or no money. Think airlines. Here, a durable competitive advantage has proven elusive ever since the days of the Wright Brothers."

Shrija Agrawal is Mint’s associate editor. Due Diligence will cover issues in India’s venture capital, private equity and deals space.

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