Case Study: IR Problems at Jet Airways: Coping with Turbulent Times in

the Indian Aviation Industry

Abstract:
The case is about the retrenchment drama that unfolded in one of Indias 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.
Jets chairman Naresh Goyal (Goyal) reinstated the employees a day later saying that he was not
aware of these sackings. The Indian aviation industry was going through a tough phase and
experts felt that it was in the interest of the company to retrench employees to remain
competitive. Experts largely felt that Goyal had capitulated under pressure from external parties
while others felt that all may not be well with the organizational communication mechanisms at
Jet.
We have created high morale for our people. Our employees believe in the company. They believe
its their company. Theres a feeling among employees that if the company makes money, its their
money and if the company loses money, thats their loss."
Naresh Goyal, Chairman, Jet Airways (India) Limited, in July 2007.
"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 Indias 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 governments 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
Background Note:
Jet, with its headquarters in Mumbai, India, began as an air taxi operator in April 1992 and started
its commercial operations a year later, in 1993. It operated with just 24 flights across 12
destinations initially, but showed exceptional growth with more than 357 daily flights to about 62
domestic and international destinations in 2008. It was first listed in the National Stock Exchange
(NSE) in the year 2005. As of June 2008, it operated over 370 daily flights to about 68
destinations both in India and abroad including San Francisco, New York,Toronto, Singapore,
Brussels, London (Heathrow), Hong Kong, Shanghai, Kuala Lumpur, Colombo, Bangkok,
Kathmandu, Dhaka, Kuwait, Bahrain, Muscat, Abu Dhabi, Dubai, etc...

Introduction:
Every time an angry passenger goes on a TV channel to narrate his ordeal due to the pilots strike,
Jet Airways chief Naresh Goyal immediately calls up senior Jet officials from his war room
a suite in a Delhi five-star hotel and demands an explanation. Clearly, he is battling to save the
image of his 16-year-old airline that has set high standards in passenger service. But some costly

misadventures in the past few years, along with the current downturn and now this pilot
revolt mean that the 59-year-old Goyal has a big battle ahead.
Jet Airways was founded in 1993 and over the next few years established itself as a leading
Indian player, becoming a case study for inflight excellence. Possibly excited by this euphoria,
industry insiders say, the management made its first big gamble by eying Air Sahara in 2006.
Apart from Jet and Air India, Sahara was among the only three Indian carriers that flew abroad
during that period. Goyal moved in to buy Sahara a year later for a whopping Rs 1,450 crores. Jet
Airways fulfilled its desire to be the only private Indian carrier to fly abroad in 2006 but it also
flew into a financial air pocket.
Acquiring Sahara meant a huge drain on Jets resources, both on financial and management
fronts. All this happened at a time when the concept of low-cost carriers was completing two
years in India. The domestic aviation market was growing at 30-40% and players like Air Deccan
were challenging the might of full service carriers. Not surprisingly, Jet has been constantly
incurring losses since 2007-08. "Buying Sahara was a big strategic mistake by Jet. This happened
at a time when Jet was growing aggressively internationally and facing tremendous competition
in local market," Centre for Asia Pacific Aviation (CAPA) India head Kapil Kaul says. With
domestic market getting new players, Jet focused on international expansion and lost nearly 10%
market share in two years. For instance, the international departures rose from 1,731 in OctoberDecember 2006 period to 3,198 for same quarter next year.
The first sign of real trouble in Jet became apparent exactly a year ago when Goyal did the
unthinkable by entering into an operational tieup with arch rival Vijay Mallayas Kingfisher. This
step was followed by Jet sacking 1,900 cabin crew. Following the political uproar, Jet had to
reverse the order. But in the past one year it has gradually retrenched close to 2000 employees.
Possibly, Jet could have weathered this crisis had the global economy not gone into a tail spin.
The full service model virtually became redundant in the domestic market and Jet responded by
launching Konnect this April and shifting most of its domestic operations to LCC section. Over
20% domestic capacity has been cut and today the airline has 280 daily flights within India and
100 overseas. Saddled with losses and a debt burden of nearly $3 billion, Goyal embarked on an
ambitious saving programme of nearly $600 million that saw staff being retrenched; loss-making
flights withdrawn and salaries of senior officials slashed by up to 25%. This cost-cutting meant
giving up things that Goyal fought for dearly. For instance, he tried hard and finally got clearance
to operate a Mumbai-Shanghai-San Francisco flight. But with this flights loss meter clocking up
$57 million, this flight was stopped. Similarly, several loss-making domestic flights facing
overcapacity were diverted to nearby international routes.
Industrial Relation Issues, Management and Decision Making at Jet
The retrenchment drama unfolded on October 16, 2008, when Jet announced that it would lay off
nearly 1,100 of its staff a day after it had already laid off around 800 of its cabin crew members.
The second phase of 1,100 employees included those from departments like management, flight
attendants, and the cockpit crew. The company decided to lay off these employees with no prior
notice but offered them a months remuneration...The growing challenges in the Indian aviation
industry were the main reason for the lay offs at Jet, according to the company and other industry
analysts.
The sudden decision not only took the employees by surprise but also caused alarm in the Indian
aviation sector. Amidst great furor and 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. According to the company, Jet paid the utmost importance to the
composition of its senior management and its human resources with emphasis on teamwork as a
key success factor. Being in the service-based industry, Jet gave priority to high quality,
professional service to its customers.
Jet received criticism from several quarters for retrenching its employees. Many of its employees
protested against the decision to oust them without prior notice. Most of them had paid
substantial amounts to receive training at major Aviation Training institutes. 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.
The Indian aviation industry was one of the fastest growing aviation industries in the world. The
Air Corporations (Transfer of Undertakings and Repeal) Act 1994 opened the Indian skies up to
private operators. Apart from government-owned airlines, the aviation industry was flooded with
private operators and low cost carriers. 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.
But the high-profile labour unrest in the form of pilots reporting sick en masse could not have
come at a worse time for the airline. Cost-cutting could entail pay cuts and possible
retrenchments in the 13,000 employee-strong airline. Having a belligerent union at this time
means trouble. Moreover, the airline is also looking at raising $400 million from the market.
Investors also dont like to put in money with troubled labour relations. Most airlines across the
world have not had a good fate ever since unions became strong. Air India and Alitalia are classic
examples, says an industry insider. Goyals fight to take the airline to its old position of strength
will no doubt be an uphill task. Jet shares were first listed in 2005 for Rs 1,100. The scrip has
never touched that level and closed at Rs 262.55 on Wednesday. Its high and low price in past
year has been Rs 551 and Rs 115. Interestingly, during the pilot stir, Jet shares have risen
marginally, lending credence to the current aviation wisdom airlines lose more by flying than
by having planes parked at airports. On his part, Goyal admits that the industry and his airline are
facing the toughest challenge ever. But along with my employees, I will weather the storm and
Jet will remain the one company that had made India proud. For me, Jet is a symbol of Indian
excellence and it will remain that. If anyone tries to change the core belief of the airline on
excellence, I will not hesitate to close it down, he said.

Jet in the News: Jet Airways' strike enters second day. Saturday September 19, 2009
For the second consecutive day, Jet Airways flights were disrupted following an ongoing agitation by pilots,
leading to cancellation of 160 flights across the country on Wednesday, an airline official said. Many pilots
continued to report sick on Wednesday despite a Bombay High Court order on Tuesday evening restraining
them from resorting to any form of strike in the country's largest private airline. Many passengers, however, had
already cancelled their flights with Jet Airways. So there was relatively less chaos at Mumbai's Chhatrapati
Shivaji Airport on Wednesday morning. Meanwhile, the pilots on strike got support from the National Union of
Seafarers of India. The general secretary, Mr Abdul G. Sarang, said early on Wednesday that until the issue was
resolved, the NUSI would not utilise the services of Jet Airways to transfer their members all over the country
and to other parts of the world.
The Jet pilots are expected to meet the director general of civil aviation, a senior civil aviation ministry official
said on Wednesday. The directorate has asked states to see if it is necessary to invoke the Essential Service
Maintenance Act (ESMA) if the agitation continues. The government is expected to meet the Jet Airways officials
sometime later in the day. It could also give clearance to the national carrier Air India to add flights to carry Jet
Airways passengers. Jet Airways officials have said that they have been able to maintain their international
operations. However, it had to cancel 16 international flights on Tuesday after the pilots reported sick.
Meanwhile, Jet Airways on Wednesday took disciplinary action against five more pilots after they went on mass
sick leave to protest sacking of their two senior colleagues, airline sources said.
The airlines has taken disciplinary action against a total of eight pilots since the strike began on Tuesday.
However, Jet Airways spokesperson was not available for comment.
The pilots had called for a strike on August 7 demanding reinstatement of the two sacked colleagues. The matter
was then referred to the Regional Labour Commissioner (RLC) for conciliation. The Commissioner called a
conciliatory meeting on August 31 advising both Jet Airways and pilots to adhere to the Industrial Dispute Act of
1947. Jet cannot terminate the services of any pilot and the pilot cannot go on a strike as long as the matter was
under conciliation, the RLC had said at that time. The pilots withdrew their strike call on September 7 but went
on mass sick leave to protest the sacking.

Issues to be discussed
Analyze the IR problems faced by Jet Airways.
Discuss various concepts related to hiring, firing, and compensation management.
Understand the rationale behind Jets decision to lay-off employees and the reasons
behind its later decision to take back the sacked employees.
Understand the importance of communication in an organization and analyze whether
there were any loopholes in Jets organizational communication network.
Understand the rationale behind the pay cuts initiated at the company.
Understand how environmental variables could affect a companys IR policies.