Jet Airways: Cardinal sins, bad decisions, hurried deals and the fall of an aviation giant

On 17th of April 2019, the Amritsar-Mumbai-Delhi flight by Jet Airways departed as usual at 10:30 pm. It would later land at the scheduled time past midnight in the early hours of the 18th April in Delhi. For the friendly crew, ground staff, security personnel, and the many such support staff, workers, managers and other executives who numbered more than 16000, a significantly large number despite the many layoffs and exits of late, it wasn’t just any other flight, but end of a saga that began more than a quarter century ago. Earlier that day, the Company had announced the inevitable, yet something everyone was hoping and praying would never have to face, that the Company would halt all its operations and the Amritsar-Mumbai-Delhi flight would be its last flight, as it isn’t feasible anymore to run the operations without the lenders extending the much needed interim cash infusion of Rs. 1500 crores to sustain operations amidst continuous accession of aircrafts by the lessors due to non-payment of dues and fuel companies refusing to refuel the fleet. The fleet itself had come down to a meager 3-4, coming a full circle as to how they started as a small air taxi operator in 1993 when the then Government of the day opened the skies to privatisation, breaking the monopoly of the national carrier that ruled the skies until then.

A couple of weeks before that, on the 25th of March 2019, Naresh Goyal, the diminutive, animated, loquacious and twinkle-eyed founder Chairman of Jet Airways, with the trademark Uncle Pecos burly moustache, along with his wife Anita Goyal who was a fellow Director of the Company, had resigned from the Board of Directors through an unceremonious exit that was necessitated after the fellow shareholders Etihad, the Lenders and the potential suitors for the Company, all who had been demanding which for some time, that the Goyals were resisting hard and fighting back. Naresh Goyal who promoted Jet Airways is not any ordinary promoter of airlines. A self-made first generation entrepreneur who started helping in ticketing and sales in his relative’s travel agency, quickly established as a leading GSA (General Sales Agent) of many leading international airlines in no time and plunged into the airline business in 1993 when the opportunity arose in the early nineties. He weathered the initial storm in the late nineties when most of the leading private airlines that time – East West, Damania, Modiluft, and NEPC had closed shop, brought in money from the Gulf, had partners as Kuwait Airways and Gulf Airways who quit later before he went in for IPO, gave a run for the money for the national air carrier for more than two decades, and developed his airline as one of the best airlines in terms of passenger comfort and experience, next only after Singapore Airlines when finally they started long haul international services in 2004-05, and had developed one of the most popular frequent flyer programs, that resulted in cultivating an army of fiercely loyal customers who wouldn’t fly another airline until they were forced to.

Not just an army of loyal customers, he was equally strong in building an army of well trained, sensitive and caring staff and crew, the hallmark of the airline that distinguished it from its competitors. His own personal connect with the employees and pilots is folklore that often he transgressed the senior management levels to reach out to them directly or would change his decisions based on his interactions with his employees. Like how he broke the salary hike strike by the employees a few years back, overruling the senior management and taking a direct call after talking to the employees and Unions. Many of his decisions – be it, the choice of aircraft, its seat designs, the discounted tariff sale of tickets were typically how he would decide on his own, though there were significant differences of opinion with his senior management, typically like any first generation Indian entrepreneur would run his company. This was one of the reasons the airline’s attempt to hire professional CEOs who would professionalise the company management, never worked as it saw the highest number of turnover of CEOs among its peers. For the Company and its employees, it was Goyals who had the final say in anything, no matter who the CEO was!

Yet, the one misstep he took in trying to take over Air Sahara in 2006-07, set off the decline in his fortunes. After betting big in that takeover, in his rivalry with Vijay Mallya’s Kingfisher Airlines, for market share, Naresh Goyal realised the gravity of the situation and wanted to pull out. However, the deposit money he had put in escrow account could not be taken back by court order, so he had to proceed with the transaction albeit at a much lower negotiated value of Rs. 1450 crores down from the original price offered at Rs. 2350 crores. Since then whatever he tried didn’t click enough.

The two business models – his corporate-y high flying Jet Airways and its culture with swanky aircrafts and the newly acquired Sahara airlines renamed as Jet Lite, with its wobbly aircraft, unskilled staff and crew, and pathetic inflight food menu, never gelled together and remained a liability throughout. The subsequent industry downturn in 2009-10, and spiraling fuel costs, forced Naresh Goyal to bring in Etihad as partner for 24% stake sale in 2013, to give him the much-needed oxygen support. However, soon after Mallya’s airline disaster landed him to be a fugitive, it was just a matter of time before a restructuring in Jet Airways also would happen, especially when the partner themselves wanted to get him out.

In the book, The Feast of Vultures, by Josy Joseph there is extensive coverage of the battle between the late Thakiyudeen Wahid of East-West Airways who was the first to come up with a private airline in India and Naresh Goyal. How the wily Goyal takes industry rivalry into a personal battle is elaborated in that book. Yet, his biggest strength is his ability to network, even with his fiercest rivals, aircraft suppliers, authorities, politicians and the industry captains, is what helps him, like how in that book it says, he successfully managed to wade through the several investigations into the funding of his company during the last NDA government in the early 2000s, and his possible connections with the D-company. Today, Wahid must be having his laugh at this development of Jet Airways, even while Mallya has sympathetically tweeted in his support.

From a position of India’s largest airline vying with international majors like Singapore Airlines and Lufthansa in terms of passenger experience, Jet Airways through Naresh Goyal and his leadership which took it to that level in the first place, squandered its position through many mistakes and missed opportunities when there were suitors like Tatas or Delta Airlines willing until a year ago to take over the airline. The ringing theme again and again is, what many of the Indian first-time entrepreneurs or even the self-made professional CEOs have as a common trait – their reluctance to let go of control of power, and the self-imposed invincibility they believe in because at some point of time, it worked!

However, for the 16000 odd employees who stare into a bleak future with arrears of unpaid salaries as to what is in store for them, and is literally on the streets begging the Government and the Lenders to rescue the airline and their careers, there is no respite as of now. The EOIs have been floated and Naresh Goyal himself along with some institutions from London is one of the bidders, but the technicalities, due diligence, the extent of haircut the lenders have to take, the impending elections and the future of the next Government, all aren’t helping them to see the light and to take off again. While some of the mid-level employees have switched to other airlines, long term loyalists and senior employees are holding fort and hoping for a turnaround, as they have always stood by the company through it’s thick and thin and were the face of the airline for the millions of its passengers over the years. That begs the question – whose airline is it anyway, once the promoters step down and lenders turn indifferent!