Jet Airways: A prospective crash landing ?

Deemed to be the nation’s oldest private airline and one that typically sees the sky more than its other Indian counterparts, Jet Airways is on the brink of collapse! Rising debts and consecutive quarterly losses are certainly not favorable for the airline. Jet Airways is drained of cash and its thirst for liquidity is growing by the day. The airline’s plan to cut costs by deducting its employees’ salaries by 25% has faced obvious criticism. Furthermore, its stock prices have been on a downward spiral for more than 8 months now. The airline reported a whopping loss of Rs 1,323 crore this quarter (Q1 2018) and as on June 30th (2018), the total debt stood at Rs 8,620 crore. To top this off, the airline is also embroiled in a controversy regarding an alleged siphoning of funds! Considering these events, it is safe to assume that things don’t look too bright for the company. We are tempted to think of this as another Kingfisher airlines chapter.

However, Jet Airways is not going to give up that easily, with the airlines’ founder and chairman, Naresh Goyal, amidst this turmoil has mustered the courage to assure long term sustainability. He, with the help of the board of directors, has chalked out a comprehensive plan to revive its cash strapped company. It’s primary goal –To solve its liquidity problem.
Presently, Jet Airways is starved of cash and experts predict that the company cannot operate for more than 2 months without drastic cost cutting. Hence, it proposes to cut non-fuel cost such as employees’ salary, maintenance costs etc. Unfortunately, due to a rise in jet fuel prices along with a fall in the value of the rupee, the company has no choice but to take tough decisions. On the positive side, the company recently received Rs 2,130.75 crore as lease incentives and domestic bank borrowings. Here, lease incentive means that a lessor is made to purchase an aircraft from Jet Airways and the same aircraft is leased to Jet Airways, thereby increasing its liquidity! Also, Boeing generously returned Rs 1,421 crore to Jet Airways, capital that was initially paid by the latter as advance payment for procuring the aircraft. Moreover, the company is on the lookout for fuel efficient Boeing B737 Max planes, which instill confidence among investors because it shows that the company is planning for the long term.

There seems to be a glimmer of hope for Jet Airways to revive completely. Although there are onerous tasks at hand, the increase in liquidity along with reduction in losses & debts is a positive indication. The company still has a long way to go with a range of challenges and only time can tell what the outcome is going to be.