The Jet Crisis

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By admin March 19, 2019 18:06

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Why there is a financial crisis at Jet Airways?

Three consecutive quarterly losses: The premium airline suffered three quarterly losses starting from the January- March quarter when it reported a massive loss of Rs 1,045 crore; then in the April-June quarter. In the July-September quarter it suffered a massive loss of Rs 1297.5 crore.

Aviation turbine fuel burden The rising cost of aviation turbine fuel (ATF) took a heavy toll Jet Airways as it flies on international routes as well. Last year, there was a significant rise in global oil prices, forcing airlines to increase spending on ATF. However, that cost was not transferred to the passengers due to the low-cost model and price war. This lead to a considerable increase in operational costs and losses.

Low-cost model is one of the biggest factors behind Indian Aviation Industry’s crisis. Jet Airways has been deeply hurt by the model followed by budget airlines such as IndiGo and SpiceJet. It means offering heavy discounts on flight tickets to attract more passengers. The profit depends upon the volume of passengers.

 

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Why Still No Solution! Etihad owns 24% of Jet Airways. Etihad has refused to become the promoter of Jet Airways.Jet chairman Naresh Goyal had asked Etihad to invest Rs. 750 Crore for payment to lenders. Etihad wanted to sell its 24 % share @ rate of Rs. 150 per share to SBI. SBI is the top lender of Jet Airways.

This price is far lower than the current price of about Rs. 236. Lender like SBI are willing to provide support. But they do not want to hold more than 49% equity through debt conversion. So the Etihad and SBI are not agreeing on the terms of the resolution plan. The government also wants the crisis to subside in this election season. If the crisis is not solved soon, it will portray a bad economic picture about India.

 

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admin
By admin March 19, 2019 18:06