jet airways (Turnaround Strategy of Jet Airways) strategic management
By: Purva Kini 3038
Restructuring strategy to convert, change or transform a
loss making company into profit making company
Reversing the position from loss to profit, from
declining sales to increasing sales, from weakness to
strength and instability to stability
Jet Airways is an airline based in Mumbai, India. It is India's
third largest airline. Jet Airways also operates two low-cost
airlines, namely Jetlite (formerly Air Sahara) and Jet Airways
Jet Airways was incorporated as an air taxi operator on 1 April
1992. It started Indian commercial airline operations on 5 May
1993 with a fleet of four leased aircraft. It began international
operations to Sri Lanka in March 2004.
Service line of Jet Airways
In Flight services –
First class, Premiere Class, Economy class
On Ground servicesCheck in options – SMS check in, tele check in, web check in, check in
while walk in.
Convenience and SafetyTowels, Pillows, Blankets, Reading Material, First Aid, Smoke
detector, Bassinets, Child care, Life jackets & seat cushion.
Entertainment- jet screen, Movies, TV program, Music, in-flight
communicator, online magazines etc.
Jet Wings (in-flight magazine), Jet Boutique.
Operates over 400 flights daily to 65 destinations.
Agreements with 133 international airlines.
Agreements with 64 carriers for carriage of cargo to their
Best Among the all Indian Airlines.
International Market - British Airways & South West
Domestic Market – King fisher, Indian
Airlines, GoAir, Indigo,
Strengths of the company
Experience exceeding 14 year
Largest fleet size
Customer relationship and Punctuality
Loosing domestic market share
Scope for improvement in in-flight service Weak brand promotion
Untapped air cargo market
Scope in international service and tourism
Fuel price hike
Overseas market competition
First Class, Premiere (Business) Class, Economic Class
Premiere (Business) Class
Business travelers, contribute 48% of passengers & 66% of
revenue, ready to pay higher prices, last time booking.
Leisure travelers, Prefers low cost airlines, ready for transit if there
is cost advantage, large %of passengers. Customer Segmentation
Jet Airways has shown eight-fold jump in losses at Rs. 891 crore in
Reeling under huge debt burden of 12,000 cr INR, Jet increased it’s
current liabilities during first 2 quarters of 2013 as its short term
borrowings increased from 1952 crore INR to 2480 crore INR this
Jet's trade payables have increased for the first two quarters of this
financial year by Rs 680 crore from Rs 4752 crore in last financial
year to Rs 5432 crore for the half year ended September 30.
Jet has shown minimal growth in its revenues from Rs 4,137
crore in the corresponding quarter of previous year to Rs 4,194
crore in Q2 of this financial year, an increase of just 1.4 per cent
whereas its expenses on jet fuel and aircraft lease rentals have
all gone up significantly.
Jet Airways paid to oil companies Rs 1810 crore for the second
quarter up from Rs 1681 crore for the same quarter last year and
it also paid more money to aircraft leasing companies increasing
its expenses by Rs 792 crore for the quarter when compared to
the second quarter of FY12-13
Jet Airways expects to conclude 334 million $ sale to Etihad by
Jet Airways should discontinue loss making routes where airport
charges have increased but there is no increase in revenues from
Jet Airways should think of adding flights to profit making routes
like Gulf and ASEAN markets
Jet Airways should sale/sale and leaseback some of its aircrafts.
Effective marketing strategies & pull customers
Join global airlines alliance
Diverting part of its fleet based on the demand supply scenario
Unique business model with presence across segments
Leasing out owned fleet to capitalize on the demand-supply mismatch.
Sell the old aircraft
Presence in 75 countries therefore route sharing is also an option
Termination of non-profitable routes
Focus on International segment- key driver for profitability
Improving domestic business
◦ strong brand image
◦ increase its domestic capacity and capture a greater share of the demand
Proposed Jet-Etihad deal will bring immediate revenue growth and
cost synergy opportunities for both the airlines and will help
strengthen the balance sheet
Key cost benefits and cost synergies in fleet
acquisition, maintenance, joint purchasing opportunities for
fuel, spare parts, equipment and catering supplies as well as external
services such as insurance and technology support will come
Other areas of co-operation will include joint training of
pilots, cabin crew and engineers
All this above will result in accelerated return to sustainable profitability.
Jet announced that they were ready to sell a 24% stake to Etihad at US$379
Jet Airways plans to raise external commercial debt worth $300 million to
replace its existing high cost loans. The total debt is a little over Rs 11,700
crore, of which Rs 7,300 crore is an aircraft acquisition loan. The rest is
working capital and other short-term debt.
The airline will save around $30 million (Rs 183 crore) in reduced interest
outgo after the debt restructuring.