Harvard Case - Jet Airways: Flying into the ground
"Jet Airways: Flying into the ground" Harvard business case study is written by Charu Banga, Abhay Kumar, Swanand Deodhar. It deals with the challenges in the field of Strategy. The case study is 17 page(s) long and it was first published on : May 10, 2022
At Fern Fort University, we recommend a comprehensive revitalization strategy for Jet Airways, focusing on a multi-pronged approach that addresses the airline's financial woes, operational inefficiencies, and declining brand image. This strategy prioritizes a business model innovation that leverages technology and analytics, digital transformation, and strategic alliances to achieve sustainable profitability and regain market share.
2. Background
Jet Airways, once a leading Indian airline, faced a rapid decline due to a confluence of factors, including:
- Aggressive expansion: Rapid growth, fueled by mergers and acquisitions, led to operational inefficiencies and high debt burden.
- Fuel price volatility: Rising fuel costs significantly impacted profitability, leading to unsustainable pricing strategies.
- Intense competition: The rise of low-cost carriers like IndiGo and SpiceJet eroded Jet Airways' market share and forced it to compete on price.
- Weak corporate governance: Internal conflicts and poor financial management contributed to the company's financial instability.
The case study focuses on the airline's struggles to adapt to the changing industry landscape and its eventual grounding in 2019.
3. Analysis of the Case Study
Porter's Five Forces Analysis:
- Threat of new entrants: High, due to low barriers to entry in the Indian aviation market.
- Bargaining power of buyers: Moderate, as passengers have choices and can switch airlines based on price and service.
- Bargaining power of suppliers: Moderate, with fuel costs being a significant expense and aircraft manufacturers having some leverage.
- Threat of substitutes: Moderate, with alternative modes of transportation like trains and buses available.
- Competitive rivalry: High, with numerous airlines vying for market share and offering aggressive pricing strategies.
SWOT Analysis:
Strengths:
- Strong brand recognition and established network.
- Experienced workforce and skilled pilots.
- Existing infrastructure and fleet.
Weaknesses:
- High debt burden and financial instability.
- Inefficient operations and high costs.
- Declining brand image and customer loyalty.
Opportunities:
- Growing Indian economy and increasing air travel demand.
- Potential for business model innovation and digital transformation.
- Partnerships with international airlines and alliances.
Threats:
- Intense competition from low-cost carriers.
- Fuel price volatility and economic uncertainties.
- Regulatory changes and environmental concerns.
Value Chain Analysis:
Jet Airways' value chain was characterized by high costs and inefficiencies, particularly in areas like:
- Inbound logistics: Procurement of fuel and aircraft maintenance.
- Operations: Flight scheduling, crew management, and ground handling.
- Outbound logistics: Baggage handling and customer service.
- Marketing and sales: Advertising, promotions, and customer relationship management.
Core Competencies:
Jet Airways' core competencies, while once strong, had eroded over time due to poor management and lack of investment. These included:
- Brand recognition: A strong brand image that needed to be revitalized.
- Network connectivity: An extensive route network with international connections.
- Experienced workforce: A skilled workforce with expertise in aviation operations.
4. Recommendations
1. Business Model Innovation:
- Shift to a hybrid model: Combine full-service offerings with low-cost elements, offering differentiated pricing and service tiers.
- Focus on niche markets: Target specific customer segments like business travelers and premium leisure travelers with tailored services.
- Leverage technology: Implement digital transformation strategies to streamline operations, enhance customer experience, and reduce costs.
2. Operational Efficiency:
- Optimize fleet utilization: Reduce aircraft downtime and maximize flight frequency.
- Streamline operations: Implement lean management principles to improve efficiency and reduce waste.
- Negotiate favorable fuel contracts: Secure long-term fuel agreements to mitigate price volatility.
3. Strategic Alliances:
- Partnerships with international airlines: Explore code-sharing agreements and joint ventures to expand network reach and leverage international expertise.
- Collaboration with technology providers: Partner with companies offering innovative solutions for flight management, customer service, and data analytics.
4. Brand Revitalization:
- Improve customer service: Enhance customer experience through personalized services, improved communication, and efficient baggage handling.
- Re-establish brand image: Launch targeted marketing campaigns to rebuild trust and attract new customers.
- Embrace social media: Utilize social media platforms to engage with customers, address concerns, and build brand loyalty.
5. Financial Restructuring:
- Reduce debt burden: Negotiate debt restructuring with lenders and explore equity financing options.
- Improve cash flow: Implement cost-cutting measures and optimize revenue streams.
- Focus on profitability: Implement a rigorous financial management system to track performance and ensure sustainable profitability.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with Jet Airways' historical strengths in brand recognition, network connectivity, and skilled workforce, while addressing its weaknesses in operational efficiency and financial stability.
- External customers and internal clients: The recommendations focus on improving customer experience, enhancing employee morale, and ensuring stakeholder satisfaction.
- Competitors: The recommendations consider the competitive landscape and aim to differentiate Jet Airways from low-cost carriers by offering a hybrid model and tailored services.
- Attractiveness ' quantitative measures: The recommendations are expected to improve profitability by reducing costs, increasing revenue, and enhancing operational efficiency.
6. Conclusion
Jet Airways' turnaround requires a holistic approach that addresses both internal and external factors. By embracing business model innovation, technology and analytics, and strategic alliances, the airline can regain its competitive edge and achieve sustainable profitability.
7. Discussion
Alternatives not selected:
- Complete shutdown: This option would have been a drastic measure with significant consequences for employees, stakeholders, and the aviation industry.
- Sale to another airline: This option would have resulted in a loss of control over the airline's brand and operations.
Risks and key assumptions:
- Execution risk: Implementing the recommended changes requires effective leadership, strong execution, and a commitment to change management.
- Market volatility: The aviation industry is subject to external factors like fuel price fluctuations and economic downturns, which could impact the effectiveness of the strategy.
- Competitive response: Competitors may respond aggressively to Jet Airways' revitalization efforts, requiring a dynamic and adaptable strategy.
8. Next Steps
- Immediate action: Implement cost-cutting measures, negotiate debt restructuring, and engage with key stakeholders.
- Short-term focus: Launch a pilot program for the hybrid business model and explore strategic alliances.
- Long-term strategy: Develop a comprehensive digital transformation plan and invest in technology and analytics.
By taking these steps, Jet Airways can embark on a path to recovery, regain its position as a leading airline, and once again soar in the Indian aviation market.
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Case Description
In 2018-19, Jet Airways stood nearly grounded. An airline that, just 5 years ago, had spread its wings across the world witnessed a stunning turnaround in its fate. The company appeared to face a perfect storm, with competition from low-cost carriers and increasing fuel prices. To excel and be a market leader, Jet Airways made big-ticket acquisitions and floated multiple low-cost offerings. However, none of these efforts seemed to have paid off as the company faced complete suspension of its operations. The case examines possible causes for the decline in the company's fortunes.
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