ABSTRACT

The main purpose of this case study is to elaborate

and bring to light the concept of change
management, diverse factors which moves
organization to change, and to understand the issues
of Jet airways and how it could have solved in a
better way. We have chosen Jet Airways since many
issues are prevailing since 2008. It has also revived
from those various problems faced but the company
has failed to sustain in the market in the recent
times. Recommendations form the last part of the
case.

The case of Change

Management at Jet Airways.
Storm 2019

Name:
Satnam Kaur Bal 2018009
Simran Duseja 2018040
Moumita Ganguly 2018043
AVIATION SECTOR

Aviation, or air transport, refers to the activities surrounding mechanical flight and
the aircraft industry. Efficient civil aviation sector is important for India as it is inter-linked
with other sectors in the economy and generates income and employment through global
commerce and tourism. A well-managed civil aviation infrastructure and efficiently-run,
competitive airlines are a must in today's globalised world.

we can see the from the above graph that annual growth was low in the year 2008-2009. In
2009 it was actually negative. Sub-prime mortgage crisis affected the airline industry badly
leading into losses.

Source: IATA (figure 1)

JET AIRWAYS;

Jet airways was formed in the year 1992 and started operation from year 1993. Jet airways
was started by mr. Naresh goyal. Vinay dube is the ceo of jet airways. 51% stake is hold by
Mr. Naresh goyal whereas etihad holds 24% in jet airways.
MAJOR EVENTS OF Jet Airways:

1993: Jet Airways begins domestic operations flying Boeing 737 jets.

1997: Kuwait Airways and Gulf Air sell their stakes in Jet Airways.

1999: A regional network is launched with turboprop aircraft.

2004: The first international services are started.

2004: The Company was listed on the Bombay Stock Exchange and became public
company on 28 December.

2006: Jet Airways announced its intention to acquire Air Sahara for US$500 million in an
all-cash deal.
2007: On 12 April 2007, the deal was back on track with Jet Airways agreeing to
pay 14.5

2008: In August 2008, Jet Airways announced its plans to integrate JetLite into Jet
Airways. In October 2008, Jet Airways laid off 1,900 of its employees, who were later re-
instated due to intervention from the Ministry of Civil Aviation (FURTHER THE CASE
IS DISCUSSED IN DETAIL).

FINANCIAL CRISIS:
Impact of GFC on Indian Aviation Sector
Airline sector has faced unprecedented turbulence due to the
combination of economic crises, Airline cargo revenues dropped
by17% and transport carried by the carriers was 33.3 Million tons in
comparison with 40.1 million tons in 2008. Similarly passengers
dropped to 2.06 Million travelers (IATA, 2009). Due to crisis the
petroleum prices rose above US$ 140 that caused many airlines to
suffer LOSSES.

GLOBAL ECONOMY IN 2008: The Global financial crisis was the sudden failure of
Lehman Brothers in September 2008. There was instability in the price of oil over a decade
that resulted in the increase of oil prices from $50 to $140. It made a significant contribution
to the downturn in the world economy. Also, the terrorist attack on the World Trade Center
paralyzed the world economy.
Highlights of the Report of airline industry in India:
(2007-08)
The total operating revenue of all th e domestic Indian carriers was Rs.344,877.4 million
during 2007-08 whereas the operating expenses for the same period was Rs.406,911.8
million resulting in overall loss of Rs.62,034.4 million.
Both National and Private Carriers experienced a loss during 2007-08, the respective
amounts being Rs.2529.78 crore and Rs.3673.66 crore respectively. Only 2 airlines viz., Air
India Express and Paramount Airways had made a profit.

Carriers engaged in Domestic Operations

Source: Directorate General of Civil Aviation (DGCA)

http://dgca.gov.in/reports/stat-ind.htm

A total of 44.38 million passengers were carried by all the scheduled domestic Indian
Carriers during the year 2007-08.
The scheduled domestic traffic passengers witnessed a growth rate of 24% during 2007-
08. The corresponding figure for the year 2006 -07 was 42%.
Source: Directorate General of Civil Aviation (DGCA)
http://dgca.gov.in/reports/stat-ind.htm

Scheduled Domestic Aircraft departures per day increased from 1153 in 2006-07 to 1367
during the year 2007-08.
The domestic average PAX load factor increased marginally from 68.8% in 2006-07 to
68.9% in 2007-08. This factor was 59.3% for the National Carriers as against 7 1.6% for
the private carriers.
The domestic average weight load factor decreased from 67.1% in 2006-07 to 65.7%
in 2007-08. Weight load factor was 56.9% and 68.3% respectively for national and private
carriers.
The market share in terms of domestic passenger carried was highest for Jet Airways
(22.01%) followed by Air Deccan (15.99%) and Indian Airlines (15.55%).
The market share in terms of domestic freight carried was highest for Jet Airways
(31.03%) followed by Indian Airlines (23.04%) and Blue Dart (17.79%)
MARKET SHARE OF JET AIRWAYS IN INDIA DURING 2008:
SOURCE: IATA (figure 2)

FINANCIAL DETAILS OF JET AIRWAYS IN MARCH 2007 AND MARCH 2008:

Particulars Mar-07 Mar-08

Revenue From Operations
[Gross] 8,81,110 7,05,778
Revenue From Operations [Net] 8,81,110 7,05,778
Other Income 67,041 34,353
Total Revenue 9,48,151 7,40,131
Selling And Distribution 98,286 80,085
Aircraft Fuel Expenses 3,29,303 2,42,764
Aircraft Lease Rentals 56,328 64,580
Employee Benefit Expenses 1,20,518 93,812
Finance Costs 49,275 24,015
Depreciation And Amortisation
Expenses 77,780 41,410
Other Expenses 2,57,920 1,88,329
Total Expenses 9,89,410 7,34,995
SOURCE: ANNUAL REPORTS OF JET AIRWAYS

Retrenchment at Jet Airways in 2008

The case is about the retrenchment drama that unfolded in one of India's leading aviation
companies, Jet Airways (India) Limited (Jet), in late 2008. After showing the door to more
than 1000 employees in a bid to streamline its operations, Jet was faced with immense
criticism and opposition by various organizations and political parties.

"While the mishandling of the Jet Airways sacking and reinstatement of 1,900 employees was
an HR and PR disaster, the larger implications of what happened are also worth considering.
It is not just that the chairman of India's most successful airline became the butt of jokes, it is
also a question of what he knew, when he knew it, and who did the bungling."

- Anjuli Bargava, Columnist, Business Standard, October, 2008.

"The sackings were completely illegal. There was no notice nor was government's permission
taken to sack 800 employees. Perhaps they realized their folly and decided to take these
employees back. The matter would have landed in the court otherwise."

- Anand Pujari, Labour lawyer, SI Joshi & Co., in October 2008.

The first phase, which took place a day earlier, saw the airline showing the door to 850 cabin
crew members. The second phase of retrenchment took place on 16th October, 2008 of 1,100
employees which included employees from all operations - cabin crew, pilots, ground staff,
airport services staff, and employees from management departments.

The company decided to lay off these employees with no prior notice but offered them a
month's remuneration. The sudden decision not only took the employees by surprise but also
caused alarm in the Indian aviation sector. Amidst great opposition by various organizations
and political parties, Naresh Goyal (Goyal), chairman of Jet, reinstated the employees a day
later amidst great emotional drama. He was quoted as saying he had been appalled by the
retrenchments of his employees, which he claimed, he had come to know only through media
reports. He added that he would "not be able to live as long as he lives" with the tough
decision his management had taken and clarified that he was taking back the employees as
they were "family to him and as head of the family he would take care of them.

A month later - in November 2008, Jet announced that it would consider serious salary cuts
for its staff to handle the aviation crisis.

While many industry analysts were surprised by the turn of events that had led to the
reinstatement of the sacked employees, they opined that Jet had been forced to take drastic
decisions such as laying off employees or initiating pay cuts because of the turbulent phase
through which the aviation industry was passing.
In September 2008, the International Air Transport Association (IATA) had predicted that
world over the aviation industry would lose about US$5.2 billion based on an average jet fuel
price of US$140. The rise in fuel prices had pushed the fuel bills of the aviation industry to
US$186 billion by the end of the year 2008.

In the last week of November 2008, Jet decided on a 20% cut in the salaries of its pilots,
engineers, and some other staff. The company planned a 5 percent to 10 percent cut in the
salary of top officials who drew a salary above Rs. 75,000.
Major events at Jet Airways:

On 16 April 2007, Air Sahara was renamed as JetLite and was marketed between a low-
cost carrier and a full service airline. JetLite became a wholly owned subsidiary of Jet
Airways

2008: On 8 May 2009, Jet Airways launched another low-cost brand, Jet Konnect.

2008: In October 2008, Jet Airways entered into an alliance with rival Kingfisher
Airlines for code-sharing on domestic and international flights, collaboration on frequent-
flyer program and sharing crew billion (US$200 million).

2010: In the third quarter of 2010, Jet Airways became the largest airline in India with a
passenger market share of 22.6%.

2012: Jet Airways merged the JetLite brand into Jet Konnect on 25 March 2012 and
started offering business-class seats after the demise of Kingfisher Airlines.

2013: In 2013, Etihad Airways planned to buy a stake in the airline following
the government's announcement in September 2012 that foreign airlines could take a
stake of up to 49% in Indian carriers. On 24 April 2013, Jet announced that it was ready
to sell a 24% stake in the airline to Etihad for US$379 million. The deal which was
expected to be signed in January 2013 was postponed and was completed on 12
November 2013.

In 2013, the airline lowered prices and entered into fare war with low-cost
carriers IndiGo and SpiceJet due to falling passenger demand. In February 2013, the
airline's market value dropped by 4.84 billion (US$67 million) owing to falling share
prices. Jet Airways made profits in the third quarter of the financial year 2013–14, after
posting losses over the previous year.

2014: Jet Airways announced on 11 August 2014 that it would phase out Jet Konnect by
the end of the year as part of plans to re-position itself as a uniform full-service operator.
On 1 December 2014, Jet Konnect was fully merged with Jet Airways, making it the third
full-service airline in India besides Air India and Vistara.

2016: As of February 2016, it is the second largest airline in India after IndiGo with a
21.2% passenger market share.
 2018: As of November 2018, Jet Airways has been reported as facing a negative financial
outlook due to increasing losses. Therefore cost cutting measures as well as talks have
been started with potential investors or buyers.

2019: JET require banks to provide for part of their Rs 8,200 crore EXPOSURE TO THEIR
AIRLINE INDUSTRY. NARESH GOYAL IS READY TO BRING 700 CR. IN THE
AIRLINE PROVIDED certain conditions. ETIHAD IS NOT WILLING TO BRING FUNDS.

Journey of Jet Airways through curves (figures in lac)

PROFIT AFTER TAX

total revenue total expense Profit after Tax

30,000.00

25,000.00

20,000.00

15,000.00

10,000.00

5,000.00

0.00

-5,000.00

-10,000.00

-15,000.00

-20,000.00

-25,000.00

SOURCE: ANNUAL REPORTS OF JET AIRWAYS (figure 3)

Jet Airways was started as a full service airline to give value to their customer. When it
started its operations, there was no tough competition at that time. Jet easily captured the
market and started earning good amount of profit. There is no static trend in the Jet Airways
profits as there is uptrend as well as downtrend due to various reasons. During initial period
of commencement it showed a good growth due to increase in number of passengers as well
as cargo revenue.

In this year 2006-07, company extended its ERP system to manage human resource more
efficiently.
STOCK PRICES OF JET AIRWAYS FROM 2005 TO 2019

(figure 4) (source: money control)

Jet airways stock prices shows much volatility. airline industry was struggling to maintain
their prices as well as cost with market price of stocks as well as Airline industry Stock
touched as low as Rs. 160 during the period 2007-2008 and from that point stock was volatile
due to instability in financials of the company. Investors feared and sold the stocks when
company showed losses.

There is no static trend seen in the stock prices.

 (figure 6)

Current Issues at Jet Airways:

1. Series of Delay in Payment of salaries to the employees

In August 2018, Jet Airways has informed its employees that they would have to take up to
25% cut in their salaries as cost of operations for airlines is increasing on the back of rising
crude and a falling rupee. Salary cuts are in the range of 5% (for those earning Rs 12 lakh
annually) to 25% (for those earning Rs 1 crore and above) starting from August 2018. Jet said
senior management had already taken pay cuts.
This decision hasn’t gone down well with the pilots, who have not agreed to a pay cut in a
market that is struggling with a huge deficit of pilots, especially commanders. The airline
says pay cuts are part of its cost-cutting exercise to achieve greater business efficiencies. The
senior leadership has undertaken a reduction in salary to lead by example.
The airline’s management team, headed by founder Goyal, met employees in Mumbai and
told them that the cut will be for 24 months and that no refunds will be made. The
management met employees in Delhi but Goyal did not attend the meeting. The airline has
not paid salaries to managerial employees and those above, for December 2018 and it has not
been paying salaries on time to about 15% of its over 16000 staff since August 2018.

2. Lack of communication between management and employees

On 26th August 2018 Jet Airways Staff and Officers' Association has expressed
dissatisfaction about management's wasteful expenditure on inefficient operations and hiring
of foreign pilots. The management at Jet Airways has received a letter from its employees'
union seeking clarification on the issues that led to the financial crisis in the airline. The
association, which claims to have around 10,000 members, has written to CEO Vinay Dube
seeking a meeting with him to have a comprehensive understanding of the factors. The
association does not represent Jet Airways’ pilots, engineers and cabin crews since these
categories of staff have separate unions. It includes staff and officers category people. The
letter, written last week, comes against the backdrop of the crisis-hit airline deferring announcement
of June quarter results, exploring cost-reduction ways, coming under the regulatory lens for alleged
corporate governance lapses and talks of a possible pay cut for the employees. The association has
also raised serious concerns about media reports and social media messages “relating to the
insolvency of the company, concerns of violations of law, Sebi investigation into fraudulent
transactions and other management actions”. Further, the association has suggested that the CEO
should have discussions with the HR department on all the pending issues in the last three years.

3. Jet Airways raises Rs 250 crore from advance ticket sales to Jet Privilege

The full service carrier, which is grappling with acute financial problems, is working to
restructure its debt as well as raise fresh funds.
Cash-starved Jet Airways has mopped up Rs 250 crore from advance sale of tickets to its
customer loyalty programme Jet Privilege, less than five months after raising money through
the same route. The deal is similar to the one done in October 2018, an airline spokesperson
said.
Last October, the airline received around Rs 258 crore from advance sale of tickets to Jet
Privilege. The full service carrier, which is grappling with acute financial problems, is
working to restructure its debt as well as raise fresh funds.

4. Jet Airways defaults on debt payment to banks

Debt-laden Jet AirwayS Ltd has delayed the payment to a consortium of Indian banks, led by
State Bank of India Ltd. Jet and its second-largest shareholder Etihad Airways are in talks
with bankers on a rescue deal that may involve the Abu Dhabi-based airline increasing its
stake from 24 per cent.
6. Debt-Laden Jet Airways Edges Closer To Safety
Jet Airways Plans To Raise About $840 Million From A Government Fund And A Rights
Issue, The Company's Board Approved A Deal For Some Lenders To Infuse Funds And
Restructure Debt.
India's National Investment And Infrastructure Fund Will Funnel 15 Billion Rupees ($210
Million) Into The Debt-Laden Carrier For A 20 Percent Stake And Jet May Propose To Raise
45 Billion Rupees Via A Rights Issue Priced At 125-150 Rupees Per Share.