The flight and crash of Naresh Goyal’s Jet
As of today, Jet is in a mess with a billion dollars in debt, according to news reports, and pending payments to pilots, suppliers and leasing firms, and more than a dozen of its planes grounded
Unknown entity Goyal made a personal fortune of $1.6 billion and entered the Forbes list of top 20 richest men in India
Goyal was seen as the man with the Midas touch, and recognition sidled up to him—as did awards aplenty. He could do no wrong
On a whim and against all advice, Goyal invested heavily in JetLite, a no-frills, low-cost airline fashioned out of the buy-over of Air Sahara
Much of the criticism and carping about where Naresh Goyal got his seed money to start an airline is credited to envy and the hope that he would fail in the 1993 take-off of Jet Airways. But with no competition from either Air India or Indian Airlines, Jet, with its radically different offering from the government-owned airlines, especially in the post-JRD Tata era, roared up the graph.
Unknown entity Goyal made a personal fortune of $1.6 billion and entered the Forbes list of top 20 richest men in India.
Goyal was seen as the man with the Midas touch, and recognition sidled up to him—as did awards aplenty. He could do no wrong.
So, the cloud over who had coughed up the initial capital became increasingly moot; and it seemed sufficient to say that it had been legally channelled through the Tailwinds company, incorporated in the Isle of Man. It remained drawing room gossip for a while, but the little Mom-and-Pop airlines, replete with the bells and whistles of modern airlines, caught public fancy and its growth graph was perpendicular.
Flights were on time, the food was good, the experience far more 20th century. Run by a martinet of a chairman, the carrier had the first-mover advantage in the government’s new open-skies policy.
For the first ten years, things went swimmingly. Goyal helmed the airline as its sole sculptor, and brooked no argument. He did bring in great talent at top dollar, but would not give them a freehand, witness the fact that seven CEOs came and went in 10 years, unable to consolidate their grand plans: the Mom and Pop mindset refused to go away.
On a whim and against all advice, Goyal invested heavily in JetLite, a no-frills, low-cost airline fashioned out of the buy-over of Air Sahara. The fleet was amalgamated with JetKonnect, Jet’s own low-cost fleet, and the airline got a collective 32 per cent of the national commercial aviation pie.
What should have been a bonanza became a brick around the neck of Jet. The decision to enter the low-cost market was sensible in itself—India was upping its traffic by as much 20 per cent annually—but Goyal wanted in on everything, and knew little of the intricacies of an enterprise that had fare structure changes by the hour in response to real-time market conditions.
Low-cost airlines function not so much on lower fares but on lower operating costs. If one is out of kilter, you lose. City pairings and timings are also crucial.
Jet had that great asset—the maximum slots for Mumbai airport—which if properly exploited, could have given the airline a great advantage. Alas, it was not to be.
When the low-cost exercise ran into the red, Goyal turned his attention back to the full-service fleet and chose Boeing 777s and Airbus A330s on not-so-profitable routes. By now, he had begun to fancy himself as a Richard Branson. He could have succeeded, but his draconian style resulted in true talents slipping away, leaving Goyal surrounded by sycophants and yes-men. Wrong decisions multiplied. Improperly advised by his inner circle and based, the legend goes, on a dinner conversation in Long Island, he added JFK to Jet’s American destinations in addition to Newark. The JFK experiment started going down the tube within 45 days and cost the airline a bundle.
Goyal placed new-generation aircraft on routes from Kochi, Mangalore and Thiruvananthapuram to the Gulf in the hope of grabbing traffic. But then, before this could come to fruition, Jet pulled back and cancelled these routes as they were not making money.
By then, overextended on these aircraft—including the 777-ER—he placed them on the London and New York routes, but could not pull in the slack. Nor, at that, pay back the banks: the debt just kept mounting.
In all fairness, Goyal’s initial idea was splendid, almost patriotic: he wanted to create an international Indian airline that flew all nationalities around the world, a literal ambassador in the sky. In recent times, he fell off that concept finally settling for a middle-class Indian menu that failed to reflect the globalisation of the discerning traveller. His own top management called it the ‘chicken curry and rice’ fare.
All these factors came together to mount pressure on him. The cash-strapped carrier has reportedly grounded 47 of its 123-strong fleet. If the airline wants to succeed, it will have to bring in professionals, give them targets and leave them to produce results.
If the one-man show continues, there will be no pot of gold at the end of the rainbow.
Jet is now in talks with Etihad for a second rescue op (the airline had injected $600 million for a 24-per cent stake in 2013). It is also making overtures to Tata Sons, but Goyal has previously rejected offers of help from that source in the past. That recalcitrance is likely to have contributed heavily to his eventually stepping down.
The final blow was probably the State Bank of India, which had lent it Rs 8,000 crore, calling for a forensic examination of the airline’s accounts. As of today, Jet is in a mess with a billion dollars in debt, according to news reports, and pending payments to pilots, suppliers and leasing firms, and more than a dozen of its planes grounded.
In many ways, it is sad that the man who had the vision to usher in the new era of Open Sky aviation into India was blindsided by his own weaknesses in not creating a functional hierarchy.
But then, he is not the first, nor will he be the last.
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