Table of Contents

Case Study ................................................................................................................................................. 1

Costly purchase ................................................................................................................................... 2
Budgeting ............................................................................................................................................... 2
Lack of Management ........................................................................................................................... 2
Economic Decline .................................................................................................................................... 4
Bankruptcy............................................................................................................................................. 4
Ghemawat’s Triple A Framework......................................................................................................... 5
Aggregation ........................................................................................................................................... 5
Arbitrage ................................................................................................................................................. 5
Adaptation.............................................................................................................................................. 6
CAGE Distance Framework ................................................................................................................... 7
Cultural Distance.................................................................................................................................. 7
Administrative Distance ..................................................................................................................... 7
Geographic Distance........................................................................................................................... 7
Economic Distance.............................................................................................................................. 7
Conclusion ................................................................................................................................................. 8
References ................................................................................................................................................. 9
Case Study
Jet airways were an Indian airline which started its operation in 1995. It was primarily located in
Delhi and its training and development center in Mumbai. India, domestic to one-sixth of the
world's population, is turning into one of the world's financial engines. The Jet Airways had almost
three decades of experience. The airline had a market share of 21.2% in 2016 and was among
the largest airline in India. In competition there were two airlines which were Indigo and SpiceJet.
The Jet airways added its international flight experience in 2004. There were three hundred
operational flights over seventy-four destinations worldwide daily. The company expanded in
2005 and 2007 when it went public, by acquiring Air Sahara. The competition faced by the rival
airlines like SpiceJet and IndiGo, lowering ticket fares in the following years, this causes the Jet
Airways huge financial loss resulting in second place after indigo the decline continued. The airline
had no competitive advantage left, airline cost increment in operational activity with the expansion.
Jet Airways followed a lawsuit which affected airlines overall performance resulting in more
financial loss. The bankruptcy in 2019 finally caused the Airline to finally shut down its operation.
Airline has taken the initiative to make a comeback in 2022. The strategic changes are essential
in the Turbulent Markets. In the second half of 2022, the airline intends to fly on internal routes.
Expanding to international destination is also a part of their agenda. The carrier used to fly six
hundred domestic and 380 international flights before ceasing operations. Instead of being based
in Mumbai, the airline will now be based in Gurugram, which is near to Delhi. However, the new
administration has stated that it will maintain a "strong" presence in Maharashtra's capital. As the
owner said, “Jet Airways (India) Ltd will restart operations at the earliest with six narrow-
body planes in 2022 after the revalidation of its air operator permit, the airline's.”

In the era of 21st century, for obtaining benefits of synergy, mergers and acquisitions are the most
widely used strategies of the organizations. To obtain benefits such as entering in new market,
cost reduction, cross selling, risk diversification, increasing shareholder’s value, M&A can be done
within the industry or outside the industry. Aviation industry of India is also in news for its various
deals of Merger and Acquisition before. Jet air ways focused on one of these mergers Jet Airways
and Air Sahara Airlines. The main objective of this paper is to analyze strategical performance of
Jet Airways Airlines pre- and post-merger. Analyses shows that there is no significant benefit
achieved by Jet Airways after the merger. Analysis also shows that there had no improvement in
company’s return on equity, interest coverage, earnings per share and dividend per share.
Costly purchase
Mainly it was the Air Sahara purchase that caused the airline towards the downfall of Jet Airways.
By the time Jet Airways acquired Air Sahara, the airline was already debt-ridden. It consumed
more money to and by the end of 2015 completely written off. Air Sahara was renamed JetLite to
appeal to the middle-class part of India's new-age cash-conscious clients. JetLite was a full-
service aircraft line and a wholly owned subsidiary of Jet Airways. In an Indian market merger of
two airlines has never been a success.

Budgeting
The acquiring of Air Sahara and forced to retain the price of tickets pay, the debt and finally when
the competitors reduced their prices on airfare the airlines constant air fare had to lose the market
share. To recover from the heavy investment, air fares had to remain constant. A large passenger
survey conducted in Mumbai investigated the sensitivity of passengers to a change in fare and
which flight products would encourage them to select either a full-service airline or a low-cost
carrier (O’Connell, J.F. and Williams, G., 2006).

Lack of Management
Crude Oil Price Fluctuations: When the value of the Indian rupee fell, and the price of crude oil
rose around the world. Aviation industry is a high-cost industry that was also affected. In addition
to the huge value of aircraft itself, the fuel and maintenance costs of an aircraft is also extremely
high (Dou, X., 2020). Crude oil fees persevered to be extremely high especially in the latter half
of of the year. In addition, the Rate of Exchange of the Indian Rupee to the US Dollar continued
to be poor. Other airlines boosted their fares to compensate for the losses, but Jet did not, forcing
Jet to take out loans. Company rests on the abilities of its management board. Jet Airways relied
on a single administration team for coping with all the operations associated to Jet.
Understanding that specialized teams are wished to run one-of-a-kind departments collectively
handling all the airline together is not an issue. Despite its acquisitions and efforts to stay afloat,
Jet Airways was clearly having problems maintaining a profitable business model. It fired 1,900
workers, who were then rehired by the Ministry of Civil Aviation.
Indian Aviation Industry

India's aviation industry has colossal potential. Initially, it was owned by government sector but
with the passage of time, many private players entered in the field (Daddikar, P. and Shaikh,
A.R.H., 2014). The airline business presently assumes a basic part in the advancement of the
country's economy since it is answerable for the transportation of individuals and items both
broadly and globally. Working class people can now effectively get to this because of the
presentation of a few aircrafts with an assortment of aviation’s administrations.

India's aviation industry has had incredible development in the new ten years, with huge
expansions in traveler and freight traffic. The quantity of working airplane has expanded
drastically, with critical interest in air terminal foundation, fast ascent in the quantity of functional
air terminals. Aviation industry is facing two major challenges of safety and performance
improvement (Dou, X., 2020).

High pay role

The pilots and higher administration representatives were paid richly when contrasted with
different players. The advantages and high convenience costs for furnishing solace and
extravagance compromised with the funds. It spent more than its income and henceforth the
obligations continued to cause.
Economic Decline

Jet Airways announced its losses multiple times in the year of 2017 and the following years.
The precautionary measures should have taken by then to stop the further devastation of the
airline.

Bankruptcy
Jet airways have bank dues of 8,500 crores. The airline additionally owes 10,000 crores to
provide and place lessors and over 3,000 crores to its employees who have now
not acquired their salaries. The organization has 36,500 crores dues and being
a service enterprise, it has negligible assets to recover. Numerous firms have filed for bankruptcy
protection or have liquidated completely, each instance having a devastating effect on the
company’s stakeholders (Kroeze, C., Zemke, D.M.V. and Raab, C., 2018).
Ghemawat’s Triple A Framework
Aggregation
The Jet Airways was aware the direction in which airline was heading towards. The airline’s
current deficit of the years 2016, 2017 and 2018 were reported. Merger happens when two
or greater organizations combine to start a new company. It can be finished via two ways
either merger thru absorption, combining two or more companies into an existing enterprise
an existing enterprise or merger through consolidation, combining two or more organization into
a new business enterprise. The merger with the Air Sahara was not easy at all since form then
merger the loss started.

Passengers started preferring cheap carriers; however, Jet Airways did not pay any attention to
the changing market scenario. Moreover, the JetLite was no longer a less expensive carrier.
So, alternatively of making profit, it was an additional burden to incur more charges in terms of
aircrafts, routes, and parking slots.

Flow of cash is the key and Jet Airways failed to locate the golden goose. The chairman failed
to attract any strategic traders to pitch in with massive quantities of money, and that lead to
the organization going through a principal financial crisis. Also, the bad incidents that Jet
Airways confronted all contributed to decreasing the share expenses for Jet Airways.

To adapt up to the minimal expense transporters Jet Airways purchased Sahara Airways and
renamed it as JetLite. The rebranding cost Jet Airways a significant debacle as Sahara was a
force to be reckoned with and the flyers that were drawn in towards the Sahara brand picture
could not resound with JetLite.

Arbitrage
The arbitrage from Ghemawat’s triple A is associated with business performance, cost reduction,
risk reduction. For a business to accept the reality is not optional instead it is a responsibility. The
Jet airways had accepted the reality the merger was not a good arbitrage and started to cause
the airline some severe damage. The strategy associated with the risk was not accurately
assessed. The merger started to show its impact on airlines overall performance and a series of
loss was encountered at the same time. On March 2018 Jet Airways declared its loss of 1036
crores of the first quarter from January to March. In August 2018, the 25% of salary pay cut was
announce of some of the employees of Air Jet. August 12, 2018, director general of civil aviation
declared a financial audit. The audit was aimed to ensure that Jet Airways had enough cash flow
to ensure the safety of the air line. Aviation management is another crucial factor determining
aviation safety. The complexity and difficulty of aviation management has increased due to the
wide range of business areas and departments involved in air traffic (Dou, X., 2020). On august
27, 2018 the Jet Airways declared the second quarter loss of 1323 crores. An audit by the IT
(income tax) department of India was conducted to look for financial misconduct in September
2018. They were alleged of not giving salary to employees. Arbitrage also discusses the
performance enhancement for any business that happens to support the business life. To stay in
the competition performance enhancement is mandatory part of the high competition business.

The airline was not able to reduce the cost of operational expenses and the competitors took
advantage of it while reducing their air fare of their own airline resulting in reducing the market
share for Jet Airways. It was difficult for the Jet Airways to reduce the cost of the air fares since
the airline was standing at the deadlock because of hiring Air Sahara. To recover the required
return form the merger Jet Airways could not reduce the price of tickets and decline started. The
owner and CEO decisions were ultimately not in the favor to cop up with the crisis. To curb the
debt, the company decided to fire 1900 employees. This led to a protest and pilots went on a
strike. Naresh Goyal expressed his anger during a press meet in 2009 saying “I will not hesitate
to close down the airline”, eventually the airline was grounded in April 2019. In 2019, Jet Airways
has been grounded due to severe financial crisis. Considering the dynamic and competitive
environment in which airline companies operate, early warning signal of financial distress is
extremely important (Verma, S. and Shome, S., 2020).

Adaptation
Focus, Externalization, Design, and innovation in Ghemawat’s triple A are associated with the
adaptation strategy. To prevent the decline of Jet Airways certain adaptation were especially
important that had to be taken by the management to sustain its operations. The necessary action
Jet Airways are as follows.

• Jet Airways should have focused on utilizing smaller fleet to reduce the expenses any
unnecessary expense should have been completely abandoned.
• Jet Airways should have remained partially operational and should have changed the
proposed strategy of their existing business model since the design strategy of Jet Airways
could not meet the demands after the merger.
• Rather than providing full flight services Jet Airways should have provided services as per
budget.
CAGE Distance Framework
Cultural Distance
Cultural distance of the CAGE framework discusses the bilateral relationship of home country and
the target country. The Jet Air ways is an Indian airline, relationship of India with the neighboring
countries are not healthy enough to carry large business operations. Since the countries with
which India is associated while having a free trade policy are all at long distance this leave Air Jet
with no other option other than to fly transcontinental flights, hence giving it the set back to carry
large flight operations at long distances with higher cost. The internationally strategy of Air Jet
can be analyzed with the given framework.

Administrative Distance
Administrative distance includes legal and admirative distance between the host and the target
country. The Air Jet use to fly seventy-four international destinations, while losing market share
with their competitors Air Jet was bound to pay the administrative duties. The merger resulted in
the dead lock for Air Jet, where Air Jet had no option left to pay the duties in the form of parking
and route fees. The administrative distance also resulted in more uncertainty for Air Jet.

Geographic Distance
To carry international operation distance, matter the most. The greater the distance between the
two countries, higher the cost will be of providing good and services. Since India’s bilateral
relations with other countries do not lies in the neighboring region of India. The Air Jet had
carried long distance flight operations.

Economic Distance
The rise in crude oil and the decrement in the value of Indian rupee led Air Jet towards more
growth and economic barriers. The economic differences between India and it friendly allies were
huge it made it more difficult for Air Jet to be successful. The international routes Air Jet was
covering was had greater GDP per Capita then the home country India.
Conclusion
There is a room of opportunity after pandemic to make a comeback since the whole air line
industry has suffered during pandemic. Jet Airways, which plans to relaunch in the first half of
2022, after being grounded for three years following a bankruptcy, has open vacancies
for experienced trainers, captains, and co-pilots. Jet Airways, the
merged organization was unable to encash the benefit of synergy. Being a low value carrier, Air
Sahara or Jet Lite was no longer capable to recover the operational expenses. But admitting
the merger impact, synergy benefit, does now not labored for the company. Being in loss, a put-
up merger Jet Airways must shut down its operation in Airline industry in September 2019.
Jet Airways' shutdown is often regarded as one of the largest organizational screw ups to
have passed off in India. A lesson for many, this put up covers the journey of Jet Airways and
some neglected factors about risk management and cost management.
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