Hard Times Ahead for India's Jet Airways

Posted by: Bruce Einhorn on June 27, 2008

India’s premier airline is facing tough times. Jet Airways, the top private-sector carrier in the country, made a name for itself providing service far and away superior to that offered by its state-owned rivals. As my colleague Manjeet Kripalani recently noted here, flying on Jet is also far more pleasant than flying on many Western airlines.

But for how much longer? Jet’s now getting hammered by high oil prices. On Tuesday the company announced a loss of $51 million, its second quarterly loss in a row. And the outlook for the coming quarters is grim; as reported by Bloomberg, Citi said yesterday the airline is likely to lose almost $470 million over the next two years. The stock price has plunged, down 50% year to date.

Other airlines of course face the same problems with fuel prices, and they’re slashing routes and imposing new surcharges to cope. Jet will probably have to do that, too. But since the airline’s business model depends in part on offering a much nicer flying experience than its Indian rivals, Jet will need to figure out a way to cut costs while at the same time preserving its superior service. Western airlines haven’t managed that trick. In the coming months, we’ll see if Jet can.

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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