INSUBCONTINENT EXCLUSIVE:
It looks like Jet Airways Ltd.'s luck has finally run out
India's oldest privately owned airline is on the verge of shutting down all its flights -- it already has perhaps fewer than 10 aircraft
active -- because it simply doesn't have enough working capital
It's more than a billion dollars in debt and has lost money for the last four quarters.On one level, you could argue that this is a good
sign for India: Its institutions are holding up
State-owned banks are Jet's biggest creditors and they seem unwilling to throw more money at the airline without a clear revival plan
This is a big change from the past, when they kept supporting one of Jet's rivals, the ill-fated Kingfisher Airlines Ltd., long after it
seemed rational to do so.News also broke a few days ago that Jet's founder, Naresh Goyal, was no longer bidding for the banks' stake in the
airline, perhaps because other shareholders wouldn't play along
"promoters" who control crucial amounts of equity maintain control of the company
That is an unhealthy lack of accountability and we should all be glad it doesn't seem to be happening in this case.Jet has 23,000 employees
and a devoted fan base, yet isn't an easy company to love
I say its luck has run out because in the past it consistently seemed to benefit from government intervention that drove many of its
full-service competitors out of the market
It's the only survivor from the first round of private Indian airlines that started flying in the 1990s -- and, in many Indian sectors, that
usually means that you've managed the government much better than your peers have.In the end, however, the market wins out
If you are competing against low-cost airlines that still somehow provide equivalent service in economy class -- not to mention a
full-service airline, Air India Ltd., that's state-owned and can absorb whatever losses it wants -- you can't dodge fate forever.If Jet
goes, and Air India is eventually shuttered, the world's fastest-growing aviation market will have just one full-service airline left, a
collaboration between Singapore Airlines Ltd
The Tatas have long been obsessed with aviation; Jet blocked an earlier attempted collaboration from taking off, and Air India itself was
Tata-owned and founded before it was nationalized decades ago
I am somehow not very confident that a group that ties its identity to aviation will manage to run a profitable airline for long -- though I
hope, for Indian flyers' sake, that I'm wrong.If I'm right, though, we face the very real possibility that sometime in the future, there
won't be a single full-service airline flying domestically in India
Is that the future of aviation worldwide Or does it tell us something very specific about the nature of the Indian marketIndian low-cost
carriers are good by world standards: They are pretty ethical about not hiding extra fees for example, perhaps because if they charged you
to print out your boarding pass at an Indian airport, there would be riots
But it's still odd that a country that might soon be the world's fifth-largest economy is unable to support a healthy aviation sector, which
should include a handful of competing full-service airlines.I can't help thinking this tells us something about the reality of the famed
"Indian middle class." While marketing executives and consultants worldwide might salivate about its growth and potential, the facts seem to
suggest that regardless of increasing prosperity, we are still very much bottom-of-the-pyramid consumers
Who needs free food, lounge access or the possibility of an upgrade anywayIf Jet survives -- and it's in the interests not just of its
creditors, but its employees and Indian travelers that it does -- it should do so without help from the government and without pressure on
Certainly, it shouldn't be bought by the government's own investment fund: Indian taxpayers already own one debt-ridden airline.If Jet
collapses, we should see its demise as another sign that sectors in even an increasingly prosperous India may not look like their
Or perhaps we are just ahead of the times, and low-cost carriers may slowly eat away at full-service airlines across the world.(Mihir Sharma
is a Bloomberg Opinion columnist
He was a columnist for the Indian Express and the TheIndianSubcontinent, and he is the author of "Restart: The Last Chance for the Indian
Economy.")Disclaimer: The opinions expressed within this article are the personal opinions of the author
The facts and opinions appearing in the article do not reflect the views of TheIndianSubcontinent and TheIndianSubcontinent does not assume
any responsibility or liability for the same.(This story has not been edited by TheIndianSubcontinent staff and is auto-generated from a
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