India’s oldest private airline Jet Airways suspended its operations after 26 long years in 2019; the news shook the entire nation. Although it was an unpleasant surprise for Indian flyers, this was inevitable given it’s dried up cash reserves and lack of additional credit lines. A once vibrant venture, Jet Airways is now severely crippled. To this day, the failure of Jet Airways is an unfathomable. However, the Jet Airways crisis has some critical lessons for entrepreneurs all over the world. In hindsight, there were several factors such as costly purchases, failure to acknowledge price-sensitive customers, poor management etc. that contributed to the downfall of the airline. However, every failure has some valuable lessons to offer. In this article, we have compiled some valuable lessons that every business can learn from the Jet Airways crisis:-
Lesson 1- Changing market dynamics and recognising potential disruptions
Lesson 2- Products don’t disrupt; business models do
Lesson 3 - Any business with a cost base which is not covered by revenues will eventually fail
Lesson 4 - A coherent strategy and a clear vision is critical to success in business
- Lesson 5 - Regardless of company size a focus on the balance sheet is essential
All sustainable businesses must have higher revenues and lower costs. Although some businesses may adopt strategies like loss leadership or discounts towards establishing market share, the losses incurred have to be recovered eventually. Not doing so at the right time is a recipe for disaster. For Jet Airways, the costs were 35 per cent more than its competitors while the pricing levels were the same. Hence, on the same levels of pricing, Jet’s competitors were able to make more money. Although Jet Airways did attempt to get its cost in line, the difference was so high that even breaking down the cost structure never helped it achieve desired results.
Airlines is one of the most lucrative markets, and the potential is sky-high with a 300 million-strong middle class. However, it equally difficult to manage airlines because of the high expenditure on fuel and parking, opportunity costs and management of the vast business. Jet Airways was seen struggling on all fronts right from the business model, aircraft, financing and costs. The airline kept changing its positioning; at first, it has positioned itself as a premium airline, then it shifted to being a low-cost provider while offering a full-service product. This shift in positioning complicated its cost structure. Hence, the company did not have a clear, compelling vision towards a singular goal. In trying to cater to all segments, Jet Airways ended up as just another airline, albeit with a much higher cost, which was not backed by revenues.
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