Expert reveals why Jet Airways really folded — and why we could be to blame
One of the world’s biggest airlines suddenly folded this week. Now, an uncomfortable truth about the possible cause has been revealed.
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Our love of ridiculously cheap flights — and airlines’ willingness to offer them — could be a major factor in the stunning collapse of a leading international airline.
Earlier this week, Indian international airline Jet Airways made the shock announcement it had cancelled all future international and domestic flights, citing a funding crisis.
The sudden decision by the debt-ridden company has left 20,000 jobs at stake as well as sending the share price plummeting and affecting the price and availability of flights both in and outside India.
But yesterday, Air India chairman Ashwani Lohani hinted at a surprising possible cause of the collapse in a Facebook post.
“We airlines need a rap on the knuckles not only when fares go abnormally high, but more so when some of us dip the fares much below workable levels leading to financial unsustainability of operations in the long run,” he wrote.
“This may perhaps provide one of the answers to the turbulence we have been witnessing in the skies for quite some time now.”
A day earlier, he also shared his views on the crisis on social media.
“The closure of Jet even if temporarily is definitely a setback to Indian aviation. It is indeed a sad day for all those in the business of flying in the country to witness a fine airline closing shop,” he posted.
“While sustained mismanagement definitely contributed, the fact remains that in the entire aviation ecosystem, it is the airline that invariably remains at the receiving end while all other stakeholders make money.
“We have in the past witnessed many airlines shutting shop and it is time to appreciate that the razor thin margins which airlines are forced to operate within a competitive environment, results in a scenario that encourages unsustainability.”
Mr Lohani’s comments come as creditors revealed they were “reasonably hopeful” potential investors bidding for a majority stake in the company could end up saving it.
Meanwhile, staff members have rallied in India’s two biggest cities, Mumbai and New Delhi, to demand a government intervention, with many claiming they hadn’t been paid in months.
News of the airline’s troubles were revealed in a statement published on the company’s website this week.
“Jet Airways is compelled to cancel all its international and domestic flights,” the statement began, before revealing it had unsuccessfully asked a consortium of lenders led by the State Bank of India for $A80.3 million to bail out the company.
“This has been a very difficult decision but without interim funding, the airline is simply unable to conduct flight operations in a manner that delivers to the very reasonable expectations of its guests, employees, partners and service providers,” it added.
Jet Airways’ collapse comes just weeks after Icelandic budget airline WOW Air also shut down all operations without warning, leaving thousands of passengers in the lurch.
WOW Air filed for bankruptcy last month after six months of desperate negotiations to sell the company.
Meanwhile, a month earlier British budget airline Flybmi collapsed as well, also leaving passengers stranded.
The carrier claimed it had been forced to file for bankruptcy as a result of uncertainty caused by Brexit.
Earlier this week it was revealed Jet Airways had racked up debts of more than $1.4 billion, which led the company to slash its operating fleet and cancel hundreds of flights this year.
It has not been announced which bidders are eyeing off Jet, although Indian media have reported Etihad Airways, which already owns a 24 per cent stake, is one contender.
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Originally published as Expert reveals why Jet Airways really folded — and why we could be to blame
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