Monday, March 25, 2019

Trying to decode and avoid India's potential second Airlines collapse .. Jet Airways ..

Like the Kingfisher Airlines went bust in 2012, Jet Airways of Naresh Goyal is facing tough times since 2018 and may go bust anytime unless there is a great help from SBI and political circles. Naresh and wife stepping down from the Director Board of Jet Airways is a welcome move so that lendors can inject INR 1500 crores more into a sick airline.
Is Jet Airways going the Kingfisher way ??

What went wrong at Jet and why is it now in a very trying moment in its life ? (click here for a Forbes mag report)

Was it a problem with mishandling of finances or operations or marketing of seats or leasing of new planes ??

This also explains why operations strategy is so crucial to organisations. Organizational Strategy as practiced in business organisations is same as Operations Strategy ..

If one does not concentrate on operations parameters to

  • Realise Reduced cost
  • Improve customer value
  • Achieve Continuous Innovation
  • Incorporate Business Process Reengineering
  • Assure Quality Assurance especially six-sigma concentrating on reducing process variation
  • Fulfil Highest Service processes
  • Secure Waste reduction focusing on value improvement and reduced costs
  • Bring about Improved Output and Productivity
  • Carry out Effective Material or Service Transformation
  • Accomplish Continuous Improvement or Kaizen
  • Exercise Inventory Optimisation 
  • Implement Data Analytics
  • Work on IT apps like ERP
  • Leverage on Cloud based SAS
  • Administer Blockchains
  • Implement Artificial Intelligence etc, all industry and market interventions come to a big naught or zero !!
Operations Management Strategy is vital to
successful business operations
After scrolling lot of data and interacting with the traveling public and experts, the author teaching at a Business School at Bangalore has identified some of the operational problems with Jet Airways and is reproduced here.

1. The passenger load factor for Jet on any domestic / international flight was only 81%. (click here..). An airline can run profitably only if it's passenger load factor in above 93%. (click here..). In the urge to capture more flying slots, Jet took too many flights but did not generate enough demand leading to the huge losses. 
2. Jet's main stress was on premium sector, and its low cost sector was Jet lite, which was treated with a step motherly attitude. Jet failed to realise that the Indian traveling public was cost conscious compared to the business class or corporate customers. Jet made the same mistake as Kingfisher underestimating the customer craze for moderation unlike western airlines. According to a 2001 National Household Travel Survey (95% confidence interval limits), business accounted for nearly 41% of all purposes for air travel across the world. This means that 60% is still very cost conscious.
3. Offering Great value for money : By offering different variants even in the low paying segment, the economy class in Indigo has four variants for different luggage carrying capability, (default being 15 kgs), the low cost airlines is intent on giving consistently high value to customers every passing day.  
4. Jet Airways and Kingfisher Airlines teaches us the same lesson. Indian traveling public is very cost conscious and is not ready to waste money on frills and food. Airlines need to give more value to customers. Even Narayana Murthy and Sudha Murthy of Infosys used to travel in economy class most of the time. 
Vital to the survival and long term vision of any organisation
5. All airlines flying in the Indian skies are equally fast, safe and highly safety conscious, all of them fly to main city airports, the only difference being the in-flight luxury and entertainment, which the Indian traveler on short and medium haul flights is willing to forgo. 
6. The low demand-to-capacity ratio kept Jet bleeding unlike the low cost airlines which had almost 93 to 95% demand-to-capacity ratio.  
7. The recent action of resting all 737 Max 8 and 10 planes from Boeing , which Jet has many, was also an important factor, though not significant in ensuring aircraft availability and capacity augmentation. 
The author is of the strong feeling that it was simply operational miscalculations and ineffectiveness which has led to the fall of Jet Airways from its glory to the present state of decline and morass.

It remains to be seen whether until the business model of Jet Airways is changed from an upmarket luxury airline to a low-cost one like Indigo, Spicejet or GoAir, it would once again float or go bust..

Click here for  McKenzie Asian Business Traveller Research Report ..


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