“With over 80 percent of its fleet grounded, de-registered and returned to lessors or even seized, the future of India’s Jet Airways looks… non-existent.” We wrote this last weekend, but just four days later Jet Airways announced it would suspend all operations on April 17 after failing to attract new investors. The future hangs on lenders bidding in a procedure that ends on May 10.

In the meantime other airlines within India are taking over the void that Jet Airways has left behind in recent months, weeks and days.

Jet Airways’ situation has deteriorated rapidly last week, when from April 10 it announced it would halt all international operations until April 15. This has been extended until April 18. Over the April 12-14 weekend, the was able to operate just 50 daily domestic flights compared to around 600-650 daily by late 2018. The Indian aviation agency DGAC has de-registered at least 21 Jet Airways aircraft, so they could be returned to their owners/lessors. On a low-note, Boeing 777-300ER VT-JEW was impounded at Amsterdam Schiphol after a court ruling request by a cargo company over default payments.

First flight in 1993
Jet Airways has been the pride of its founder Naresh Goyal since the first flight took off on May 5, 1993, from Mumbai. It operated on domestic routes with a fleet of four leased Boeing 737-300s which grew to 41 in 2003, allowing for 250 daily flights. Goyal aspired to make Jet Airways India’s premier international on number of routes and on service, so the airline in 2004 operated its first international routes from Chennai to Colombo (Sri Lanka) and Delhi to Kathmandu.

Many analysts say the downfall of Jet Airways started soon afterward. Over the years, the has attracted many passengers on its international network by offering an attractive premium product at a competitive price. But it came at a price. Jet Airways investment in a fleet of 10 Boeing 777-300ERs and nine Airbus A330s was not only expensive as they were all leased, but also very expensive to operate on its long-haul network. By 2013 the airline was so deeply in debt that Goyal was only able to survive thanks to Arabian money. Etihad Airways took a 24 percent share, with Goyal remaining in control of 51 percent and the remaining shares stock floated.

Jet Airways until recently operated ten Boeing 777-300ERs. (Jet Airways)

Jet Airways re-invented its international network in 2017 by signing an enhanced cooperative agreement with Air France-KLM, re-routing 64 weekly flights through Paris Charles de Gaulle and Amsterdam Schiphol and connecting from there to Toronto while also reinforcing its UK bases with Manchester additional to London Heathrow. The was awarded the title ‘India’s Best Airline’.

Mounting in 2018
Higher fuels prices, rising within India’s very competitive and price-sensitive market, currency as the Indian rupee lost value against the US dollar all contributed to mounting losses in 2018 of around $1.2 billion. Goyal was unable to turn the tide as investors and lessors got nervous over the future of the and their assets, especially as Jet Airways went default on payment of interest to State Bank of India (SBI) and a consortium of investors.

The situation also confirmed how dependent Jet Airways has been on lessors with its almost 100 percent leased fleet. Still, In January this year, the denied any news stories that the company’s future was in danger, citing a plan issued the previous August that with cost-cutting measures the airline would be able to improve.

Etihad was lured to increase its share in Jet Airways to 49 percent. Not without its own financial limitations, the Abu Dhabi-based airline has had second thoughts. Despite cooperating on a restructuring plan since late 2018, Etihad left the initiative with the SBI-led consortium of Indian lenders. On March 25, Jet Airways announced the consortium had taken a majority share, on the condition that Naresh Goyal and his wife would step down from the Board on April 1.

Jet Airways hoped that restructuring and clearing of pending dues to lessors, vendors, creditors, and employees would allow the airline to return to business as usual and re-deploy aircraft grounded by lessors. It didn’t work out that way. On the contrary, in the first week of April lessors continued to repossess aircraft and with approval from DGAC de-registered 17. With its 777 and A330 long-haul fleet parked until further notice, its five MAX 8s grounded over certification issues, Jet Airways only operated some 20 737s and ATR turboprops over the 13-14 April weekend. A stark contrast to the 119 in the fleet late 2018, with 125 MAX and 10 787-9s still on order.

Impact of Jet Airways grounding
As Jet Airways has been forced to reduce its capacity over the last few months, the question is what permanent or temporary grounding of the airline will mean for India’s air traffic. As minister of Finance and Corporate Affairs Chowkidar Arun Jaitley recently said on Indian TV, the end of Jet Airways would be completely contrary to the trend of continued growth of India’s airline industry. The country has seen one of the fastest year-on-year growths, with 18.6 percent last year.
Yet, as CEO Phil Seymour of IBA consultancy outlines in his latest India-presentation, the industry is still comparably small: at 624 aircraft, the combined fleet of Indian airlines is smaller than that of Southwest Airlines (676).

Looking at the impact on daily operations, we checked the latest available traffic data from the Indian DGAC. This is for 2017-2018. In this combined domestic and international traffic, Jet Airways accounted for 580 daily flights to 37 domestic and 20 international destinations. As reported this has been reduced to just 50 domestic-only flights a day last weekend.

IndiGo has seen rapid domestic growth and seems ideally placed to take over Jet Airways-routes. (IndiGo)

The biggest airline in India is IndiGo at 950 daily flights in 2017-18, which since has increased to some 1.300 since on 53 domestic and 17 international routes. Mid-March IndiGo announced 14 additional flights to three new destinations to Chennai, Raipur, and Gorakhpur, strengthening its position. It also adds four so-called UDAN or routes to underserved destinations. On April 16, IndiGo announced ten additional daily flights from Mumbai from May 5 and eight from Delhi from May 10.

Air India was operating 103 international and 317 domestic routes in 2017-2018, or a combined 420. Its low-cost airline Air India Express accounted for 80 daily flights, both in- and outside India. Its subsidiary Alliance Air flew 57 daily flights but has grown rapidly since. Air India and its partners could benefit from a Jet Airways demise, but more domestically than on international routes. Air India would need slots but doesn’t have them at Amsterdam Schiphol, to which Jet Airways has been operating four daily flights until last week.

Another airline to benefit from Jet’s troubles will be SpiceJet, which operated some 380 daily services according to the DGAC data. Of these, 35 are domestic and 6 international. On March 31 SpiceJet announced it would add 14 UDAN-routes in Jharsuguda, Kishangarh and Lakhimpur. None of them were served by Jet Airways before, so these routes will reinforce SpiceJet’s position as the largest regional airline. On April 18, so the day Jet Airways announced it would cease operations, SpiceJet launched 24 new routes from Mumbai and Delhi. The airline is also expanding its international routes,on April 15 becoming the first Indian LCC to offer Hyderabad-Colombo. SpiceJet will add routes to Hong Kong, Jeddah, Riyadh, Dubai, Bangkok, Dhaka and Kathmandu from late May. To be able to fly these routes, SpiceJet has sourced 22 Boeing 737NGs and five Bombardier Q400s.

SpiceJet’s 13 Boeing MAX 8s are grounded, but the airline is still growing fast. (SpiceJet)

GoAir is another player of importance, with 190 daily flights listed in the DGAC traffic data, which according to the airline have increased to 230 to 24 domestic and four international routes.
Vistara, the joint-venture of Tata and Singapore Airlines, accounts for 100+ daily flights within India, but the airline has aspirations to do international services.

Biggest impact is on ‘international’
With Jet Airways out of business, the reduction in capacity in India seems to have a limited effect. Major competitors as IndiGo and SpiceJet have overlapping flight schedules on almost all destinations, with Spicejet’s showing more gaps (notably to Bhuj, Chandigarh and Lucknow) than IndiGo’s. As such passengers have multiple options to get from A to B within India on different airlines, even without Jet Airways.
The situation isn’t new to them: rival airlines have been able to adjust their own capacity for most of this year already after seeing the troubles their competitor was in. And as their announcements have shown they will continue to do so by opening new routes and increasing frequencies.

What could be lacking are aircraft to fill the void if airlines are unable to source capacity elsewhere. In particular IndiGo and SpiceJet have been hit by aircraft/engine issues (Airbus A320neo and Boeing 737 MAX) that reduces their capacity. There has been a sudden effect in the first week of April when more Jet Airways aircraft were returned to lessors and could find new users within India.

Proportionally a bigger impact Jet Airways’ demise has is on the international network. Its destinations were not served by all rivals, mostly only Air India offering overlap in its network. Here too the competitors are filling the gaps, with IndiGo and SpiceJet adding new international routes.
At Heathrow, five slots have been returned by Jet Airways for use by Etihad. In Paris and Amsterdam, Air France and KLM plus Delta/Virgin Atlantic will lose a strategic partner if the Indian airline goes out of (international) business. Jet Airways acted as a feeder to their own network, with KLM and Amsterdam Schiphol having worked hard to increase connections to India since 2017. KLM said it was “carefully monitoring” the situation and since April 18 has been adapting capacity on its Indian routes by using the bigger Boeing 777-300 in stead of the 787-9 when needed.

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