I fondly recall that day, a good two decades ago and I was returning from the US from a business trip by a foreign airline with a code-share with an Indian Private Airline. As we were landing in Delhi, I could see I could still take in just the nick of time, the next flight operated by their affiliates, back to Calcutta and avoid a lay-over – and I approached the ground hostess, a bright intelligent young lady…what followed in the next 15 minutes was absorbing! The good lady phoned up somebody at the domestic airport who in turn directed her call to the cockpit of the onward flight aircraft, (which I later learnt was nearly cleared for departure) she spoke to the captain and seized my boarding card and with me in tow, hailed a cab…and in 7 minutes I was at the domestic terminal security and in another 3 minutes I was actually ensconced in the plush front-row window seat – felt excellent (if you didn’t mind the dozens of indignant eyebrows up sky-high!) Those were the service levels! And that was Jet Airways!
And when last week, I saw the last flight being pushed back at the Amritsar Airport, the first thing I recalled was the face of that wonderful lady – the good hostess who 21 years ago ran out of her way to help a customer! It’s a pity – we couldn’t preserve one of our prime enterprises. We are perennially in a reactive mode – wait for the business to die first and then act!
I thought I’ll take a look first at the Jet Airways mess, and then at the civil aviation landscape itself at this country.
My Take: The Jet Airways’ woes really started from around 7 years back when it first stared right into competition from the likes of no-frills Indigo and Spice Jet and by 2014 Indigo had already usurped the top slot from Jet Airways. I think Jet Airways has been a victim of its own creations – growth thru lobbying, thru policy changes, huge expansions and huge borrowings and commitments without looking at associated market risks, particularly the volatility of the crude prices and the associated Rupee depreciation, and of course the landing and logistic costs. So, you see last year it reports losses of more than Rs 3,300 crore, accumulated losses pile up to Rs 9,000 crore, with borrowings and other liabilities together at Rs 21,000 crore and remember, it takes close to a neat sum of another Rs 20,000 crore to run the airline for a year and with no fund infusions from the promoters. All this when the industry has an average growth of around 20%!
I’m a bit surprised that as late as in 2016-17 they still held an investment grade rating when actually the company was irretrievably in dire straits! I’m equally perplexed that the Independent Auditors’ found absolutely no reasons for writing an adverse report and in fact were quite satisfied that in all material respects, an adequate internal financial controls system has been maintained. It’s really baffling, when you reflect at our ‘ease of doing business’ parameters where we came 7th best of 190 countries in “Corporate Governance”!
I’m also completely non-plussed as to why the Government chose to handle Jet Airways’ debts thru the Bankers (from whom I do not seem to recollect seeing in my forty-five years of Corporate Finance, an enviable track-record of solutions) instead of the Insolvency and Bankruptcy Board (IBBI). Till very recently, the promoters went on promising that there were no stress at all and plans for a new investor are final for the flyer to bounce back as if an Albert Camus (in his “Man in Revolt”) was speaking of Simone Weil as she lay dying of tuberculosis, ‘Real generosity toward the future lies in giving all to the present’.
At the end of the day it’s 20,000 employees and their families, multitude of operational creditors, thousands of indirect wage earners, banks and institutions and public money that’s in peril. It’s so pathetic, a senior technician committed suicide earlier this week from financial distress.
My take is, the Government should lay its hands off and allow the IBBI to involve the partners Etihad, new investors possibly the Tatas and lenders and resolve, and they should do it fast before equipments become unserviceable. It’s a good thing that some of the aircraft have been leased in by Spice Jet and Air India meanwhile.
The civil aviation land-scape in its nut-shell: Five months back the Union Minister stated we will be doing around 230 million trips this year and in 20 years we will be doing a billion trips a year. (China does 600 million today). If I see the position on ground zero, Air India with its oft repeated “Server Outages”, Indigo and Spice Jet struggling with engineering issues, I wish I knew what plans are really afoot towards normalising safe and smooth operations in the first place. And how I wish I found somewhere, how many new airports are ready, hosting how many new flights. Aviation Turbine duties are a whopping 30% higher than most countries and it has no GST Credits. Simple things take decades, think of the parallel taxi-way, or the long overdue parking house or the grade separators at Goa Airport!
And in conclusion: I think tourism and transportation for India should be of highest priority – look at the job potentials and hinterland development possibilities in our great country. We need to do a lot more in this industry – a crucial touch point is civil aviation and we better buck up and give our “best” as Camus’ real generosity!
(Binayak Datta is a Finance Professional and has been Company Director and CFO in large MNCs and Indian Corporates)