Summary:
This report consists of the problems or crisis of jet Airways Airline and how that could be addressed, or which models are implemented in order to operate the airline successfully. The jet Airways went to financial losses this year 2019 due to improper management plan and rises in fuel prices lead to delay in its debt. Lack of skilled staff and centralization of decision making are the result to poor management planning. The company was unable to pay its interest and principal amount to the creditors and it has been announced to stop the jet Airway’s operations and services. In terms of the success of jet Airways the effective management strategies need to implement which will be described in this project efficiently. This project will outline some other problems which are related to the major problem (improper management plan) and the causes of these issues. The analysis of the chosen problems and possible solution to overcome these difficult situations will be explained within this project. Moreover, cost benefit analysis, best alternative options, reasons to choose the alternatives, risk associated while using the potential options, recommendation have been elaborated for clear understanding of the project objectives.
Introduction:
Management plan plays a key role in every business decision and their operations. If the inappropriate planning is done by the management, it causes of low profitability and insolvency of the business. The jet Airways maintained the poor planning to run its business. Goyal the founder of Jet Airways wanted to control on all the decisions and company has lack of professional management which is important to make effective and valuable decisions (economic times, 2019). It is argued that the decision of acquiring Air Sahara Airline was the wrong decision made by jet Airways because after that its financial position went down and faced legal or human related problems. Furthermore, it failed to pay the debts on time because of wrong investment and unplanned strategies adopted such as it has more offices in various countries than its destinations resulted to financial crisis. During the time of its financial losses, the price of fuel increased, and jet Airway keep continuing low cost approaches for increasing the passengers which turned the Airline into deficiency and loss. Therefore, the improper management plan and their wrong decisions made the Jet Airway insolvent.
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History:
Jet airways was incorporated on May 1993 as private Indian company with limited liability under companies act and full-service airline operates in 76 destination including Europe, North America, Middle East, and Asia. At that time Mr. P.V.V. Chalam and Mrs. Anita Goyal were shareholder of this company. These shares were transferred to Tail winds on May 12, 1994, and Mr. Naresh Goyal hold them on the behalf of tail wind in terms of RBI approval letter. Jet airways launches its first inter-connectional flight by linking Mumbai with London Heathrow by non–stop day flight. In 2006, jet airways signed special code sharing agreement with American airlines which was world ‘s largest carrier for INDIA- USA flights. In 2008, jet airways launched its daily direct flight between Mumbai and Bangkok and for this, jet airline wins best cargo airline of central Asia award. In 2013, Jet Airways started joint ventures with Etihad Airways and combined their network with 130 destinations (ndtv, 2019). In 2007, the profitability of jet Airways fell down and went into loss.
Problem statement:
The major problem of the Jet Airways was poor planning made by the management. Firstly, the Goyal was the sole planner and strategist of jet Airways and control all over the activities which led to wrong decision making. The fund distribution was not made at appropriate place which tend to liquidation of the Jet Airways. The company was unable to pay its creditors and struggling with financial losses. Fuel prices, operating cost of airline were at higher cost and did not come to cheap. In that situation, the company continuing adopted the full -service strategy and own low -cost brand with cheap flight rate which is the result to losses (Lakshya, 2019). Unfortunately, company tried to increase the share capital by decreasing the value from Rs. 2200 crore to Rs. 2000 crore. The other related problem was that management took bad decision of acquiring Air Sahara Airline in 2007 which was already struggling to pay its debts and the burden of debts of both jet and Sahara Airlines put the jet Airways into financial losses (Lakshya, 2019). Demand fell down because the poor services and other rival Airlines were providing impactive services and better aircraft designing and planning were taken into consider.
Key Stakeholders:
As the jet Airways had improper management planning which causes of various above-mentioned problems and the key stakeholders in this regard are the management of jet Airways involve Naresh Goyal, the partner company Sahara Airways, the Indian government and the shareholders are the stakeholders. However, the management is the key stakeholders in this project of Jet Airways.
Analysis of Problems:
· Alternatives:
There are some possible alternative concerns of Jet Airways which were the consequences to finish or insolvency of jet Airways. The company made wrong decisions tend to create various alternative problems. The company lay off 1900 employees instead of reducing the operating cost of the Airline because they had to pay debts which turned to low rate of passengers, as the employee fired the services provided to passengers were poor (Beresnevicius, 2019). Moreover, they were operating in many countries where they have no destinations, and this increased the cost and debts of company. Last but not least, the acquisition of Sahara Airline (debt-ridden) was another problem for the jet Airways.
· Preferred Solutions:
The best possible solution can be applied on the basis of above-mentioned problems of the jet Airways. Here are some preferred models or strategies need to be applied:
- The proper management planning is the foremost model for jet Airways company and the Goyal (founder of JA) need to approach the decentralization in planning and decision-making process which will give the advantageous result.
- Appropriate distribution of funds is the key solutions for paying its debts on time. If the management, make decisions properly how to invest the outside funds at right place then there will be no place of financial crisis. Like jet Airways, invest on buying Sahara Airlines the debt-ridden Airline.
- Using the people-oriented model and friendly approachable behaviour with team members and employee. The Goyal fired employees and did not pay their salaries which was unfavourable for the company. Implementing this approach would be helpful because the Costumers’ experience comes from the attitude of the employees. Moreover, flexible policies should be implemented for customer satisfaction such as ticket cancellation policy. Passengers can cancel their ticket before 30 minutes of the departures.
- Expanding the destinations can be great decision to increase the revenue.
· Reasons of choosing solutions:
The main reason of approaching these strategies is that these are based on management planning and their structure. If the management take valuable decisions then all the problems would be solved as, all decisions are made by the management and one right decision will change the whole scenario of Jet Airways.
· Cost-benefit Analysis:
The cost of choosing these models will be overcome by implementing them. Because the benefits associated with the models undermine the cost. The company need to hire professionals for proper management planning which will require more funds. However, the government, public and private shareholders, merge with profitable company would be the greater sources of finance.
Risk and Assumptions:
The following models have risks and assumptions that can generate after implementing them.
- Lack of human resources management
- Shortage of time and resources at given period
- Rises the price of resources (fuel, aircraft materials, and taxes, etc.)
- Financial risk associated with increasing the prices of resources
The management should consider these risks while planning and implementing the strategies. The management need to be planning for future uncertainties and keep reserves to tackle with that problems.
Recommendations:
The main issue of the jet Airway was that struggling to pay its debts because of financial crisis. The reason is the poor management planning thus, they need to make efficient planning when it further tries to renovate its business and require calling the decentralization in decision making. The company will have to choose the best routes and flights to improve better network. On the top, taking the right partnership for increasing the profitability is very important decision for jet Airway. Furthermore, it is recommended that using the new innovative technology to improve their efficiency and to satisfies the passengers and employees as well.
Conclusion:
From the discussion in this project, it can be concluded that Jet Airway undertook various mistake that result to insolvency of the company. As the company did not organise the funds distribution appropriately lead to struggling of paying the debts. The major reason behind all the concerns occurred within jet Airway was management misfunctioning and no strategic planning taken into account. Because the management take all the valuable decisions and responsible for all complications and liquidation of Jet Airway.
References:
- Lakshya Singh. (2019). 5 Reasons for the Shutdown of jet Airways, India beloved Airline. Retrieved From: https://startuptalky.com/case-study-jet-airways-crisis/
- NDTV Profit. (2019). Jet Airways: Reports, Company History, Directors. Retrieved From: https://www.ndtv.com/business/stock/jet-airways-_jetairways/reports
- Rytis Beresnevicius. (2019). Why did jet Airways fail? Retrieved From: https://www.aerotime.aero/rytis.beresnevicius/23007-jet-airways-crisis-explained?page=1
- The Economic Times. (2019). The rise and fall of India’s private oldest Airline. Retrieved From: https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/jet-airways-naresh-goyals-folly-how-to-crash-a-business/articleshow/68930916.cms
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