Jet Airways Essay

N arsh Goyal, who already owned spring tonal pattern (Private) Limited (which provided sales and marketing for unknown sortways in India) took advant while of this opportunity by setting up spring sendways as a fullservice schedule flight path that would give competition to state-owned Indian Airlines. Indian Airlines had enjoyed a monopoly in the domestic market between 1953, when every major Indian air transport providers were home(a)ised under the Air Corporations Act (1953), and January 1994, when the Air Corporations Act was repealed, following which Jet Airways received scheduled airline status.Jet Airways 45 destinations intromit most of the big cities in India. International destinations include Kathmandu, Colombo, Singapore, Kuala Lumpur, Londons Heathrow Airport, Bangkok, Brussels and Newark. Jet Airways was the first private airline in India to fly to international destinations. It bring forthed international operations in attest 2004 between Chennai and Colo mbo after it had been cleared by the Government of India to maneuver scheduled services to international destinations. MACRO ENVIRONMENT FACTORS stinting Economic environment of India and world affects the airline application to a great extent.Factors inter compoundable fluctuations in globular sack prices, exchange rates, slowdown etc substantiate variable impact on the way Jet Airways has been operating in this field. unity and lone(prenominal)(a) of the most important aspect that has greatly modify the worlds transportation system is the high fuel price. Besides high taxes, honey oil fuel prices have become apostrophizelier than crude oil prices which have greatly affected the bottom-line for many airlines including Jet Airways. State taxes on ATF available by and through government agencies vary between 4% and 30%, making the fuel 30% to 50% costlier than the global average.In Tamil Nadu, Karnataka, Bihar, Madhya Pradesh, Gujarat, West Bengal, Maharashtra and Hima chal Pradesh the cess is 25% or higher. The three listed airline companies Jet Airways, Kingfisher and SpiceJet all of which reported losses in the quarter ending December 2011, blamed rising ATF cost for their bad financial performance. In February 2012, the Centre gave a nod to straight off import of ATF on a case-to-case basis But once airlines start importing ATF, traffic at the countrys congested ports is in all likelihood to emergence, making matters worse for exporters and importers.Airlines will in any case have to factor in the cost of transporting ATF from the various ports in the country to airports around the country, something which could eventually motivating to increase in the ATF cost. Jet Airways in its financial report has similarly indicated the losses that it has incurred due to rupee depreciation. It has been reported that revenue from exceptional items diminish by 61% from Rs. 18,919 lakhs in Fiscal 2011 to Rs. 7,319 lakhs in Fiscal 2012 in the firs t place on account of depreciation of the Rupee against the Dollar in the on-line(prenominal) year.Even in the past Jet Airways has experienced slowdown beca accustom of global recession. In 2008 during recession, Jet Airways was forced to discontinue the following routes AhmedabadLondon, AmritsarLondon, BangaloreBrussels and Mumbai move San Francisco. It in like manner had to put an indefinite delay on its expansion plans. Naresh Goyal, Jet Airways promoter is unable to put in more funds via his memory company due to FDI restrictions. He holds 80% in Jet Airways through Tailwinds. He claims NRI status, where 100% ownership is allowed.However, Goyals investment is via Tailwinds, which is considered FDI by the Indian government. Tailwinds is registered in the Isle of Man. In India, only if 49% FDI investment is allowable in airwave. Airline line of credit is a complicated one and only airlines would be interested in investing domestic carriers. The government is looking for at allowing foreign airlines to invest in domestic carriers tho in that respect would be no change in FDI cap of 49%. In this 49%, currently foreign airlines are non allowed to participate. So if this change happens then there would be inflow of funds from foreign airlines.The promulgation of ECB (External Commercial Borrowing) with a limit $1 billion in the budget 2012 will also give some relief to debt ridden airline companies. Shareholding Naresh Goyal 80% FII 6. 7% DII 7% Public hold 6. 3% Social The guts of the airline industry is people. Individuals in the management, technical and crew are prudent for undertaking the task of serving their customers with utmost care and excellence. These individuals are handy and tailored to the industrys selects before they are allowed to work. They need to meet certain standards of service and technical knowledge designed to get together the customers.For this reason the players invest cardinals of dollars to improve the knowledge of their workers. Jet Airways plans to set up a marketing services firm and launch an aviation reading academy, with a total investment of Rs 1 crore. The proposal is, however, subjected to regulatory approvals, including those from the external Investment Promotion Board and the Reserve Bank of India. The proposed academy would be based in Mumbai and offer certificate courses in in-flight services, ticket military reserve and check-in services, according to a brochure brought out for the institute.Operations in the northeast are guided by the governments avenue Dispersal Guidelines (RDG) which entails that all Indian carriers fly to the northeast and other outdoor(a) parts of the country, more so as a complaisant obligation. afterwards posting a loss of Rs 298 crore in the last quarter, Jet Airways has seek government clearance to scale down its flights to the northeastern region by about half to stem the losses. Technological Technological factors in macroenvironment are the most dramatic forces in changing the market place. They help the telephone circuit to create new products and harness new opportunities.Jet Airways makes strategic use of the latest technology to interact with passengers at a global level. Its prodigious presence on social media platforms like Facebook, Twitter, LinkedIn, YouTube and Flickr ensures increase in cognizance and r separately of the company brand. The companys growth on the social media mesh topologying platform has been noteworthy registering an exponential increase in the number of followers and fans on Twitter and Facebook. In the coming year, the Company aims to introduce state-of-the-art mobile applications for Android, iPhone, BlackBerry and Windows mobile phones.These applications will provide passengers with a genial and seamless option to book tickets, check-in, access their JetPrivilege account etc. using their mobile phones. Additionally, the Company intends to commence the use of 2D Mobile Bar-coded embarkment passes for guests who have checked-in for their flights, thus providing a paperless travel experience. Political In India, one can never over-look the policy-making factors which influence each and every industry existing in the country. Like it or not, the political interference has to be present everywhere.Given below are a few of the political factors with respect to the airline industry The airline industry is very sensitized to changes in the political environment. One instance of Government Policy resulting in great uncertainty is the fact that the Indian Government has not allowed foreign airlines to participate in FDI in aviation as yet. So the airline industry, which is currently facing draught of funds can still not expect foreign players to chip in. International airlines are greatly affected by trade relations that their country has with others.Unless governments of the two countries trade with each other, there could be restrictions of flying into particula r area leading to a loss of potential air traffic (e. g. Pakistan & India) Political factors can also affect the day-to-day working of the airline industry. For instance, in 2009, Jet Airways announced plans to lay-off 1800 employees that were undergoing probation with the Company. What happened was a PR disaster for the Airline. First the laid off employees absolutely became socialist in their approach and later went a step still managing to politicize the whole matter by seeking support from MNSs Raj Thackeray.Other parties and sundry ministers then followed the suit and jumped into the bandwagon, until the Jet Management had to devolve the decision and ask laid off employees to join the duty back. sanctioned and Regulatory Operating in a cross border network of alliances and partnerships, multinational companies like Jet airways are subject to international and national regulations in terms of assignment of routes and destinations international aviation regulations partners efficacious standing as well as local laws.These constraints not only leave little room for airlines to operate but are also the sources for its highly efficient value chain. Another aspect is industrial relations. Personnel in the airlines industry from pilots to cabin crew to technicians everyone work in the capacity and provisions given by the laws prevalent globally. For this reason, everyone is cognizant of their rights to legal aid if need. Since most of the airline personnel in the world have associations and unions they tend to have an upper hand over management.The management because has to comply with their necessitys if it is within the capacity of the law Not only is this but the airlines also subject to strict safety, hygiene and efficient regulations. Airlines that do not deliver services according to international standards do not only lose out in the competition but are also subjected to aviation penalties. The principal regulatory authority that regulates the civ il aviation sector in India is the Director General of Civil Aviation, or DGCA. To operate scheduled services in India, an airline requires an operating permit from the DGCA.This permit is required to be renewed on a year-to-year basis. An airline incorporated in India and operating scheduled services is also required to register all its aircraft with the DGCA, save and except aircraft which are wet leased. On July 10 2012 aviation regulator E K Bharat Bhushan was abruptly removed from his key aim in the backdrop of his tough stance against debt-ridden Kingfisher Airlines over its failure to gift salaries to its employees. Newly-appointed chief of the Directorate-General of Civil Aviation Prashant Sukul on 13th July 2012 asked all airlines to strictly adhere to prescribed safety standards.Demographics Indian aviation industry promises big growth potential due to large and growing eye syndicate population, favorable demographics, rapid economic growth, higher disposable incomes , rising aspirations of the kernel class, and overall low penetration levels (less than 3%). Few prominent factors we need to look at from demographics perspective Working age population India is put forward with a young and growing population. India has amongst the best demographic ratio globally and this would continue to improve over next three to four decades.As compared to children and elderly, a relatively higher percentage of the earning population travels by air to save working hours and for business. The rising proportion of people of working age also implies higher disposable income as pressure on dwelling house for the needs of dependent children & elderly comes down. Both the above factors along with a growing working age population would lead to higher demand for air travel. Exploding Middle Class McKinsey Global Institute (MGI) predicts that the Indias middle class will reach 583 million from the current 50 million by 2025.With this exploding middle class the demand for air travel is butt to go up in a unidirectional way. Nuclear families increase Increasing VFR (Visiting Friends and Relatives) Travel The traditional joint-family system in India is rapidly faulting up. With increasing expenses and with more people migrating to cities for work, people are increasingly opting for nuclear and small families. This trend of small families has also bought a change to their lifestyles, with friends & relatives visit more frequently and families taking more vacations implying greater frequency of travel.Air travel is finding a growing proportion of this additional travel, with smaller families making air travel for the entire family more affordable. Increasing barter Growing employment means higher disposable income, more business travel and higher opportunity cost of travel time. All these loan to higher demand for air travel. Increasing Leisure Travel tourism accounts only for 2. 5% of Indias GDP, versus 6% in Asia Pacific and 5. 3% in China. However this ratio is immobile changing with India emerging amongst the fast growing tourism destinations in the world.