Jet Airways' Strategy, Operations and Competitive Position
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Case Details:
Case Code : BSTR172
Case Length : 18 Pages
Period : 1993-05
Organization : Jet Airways
Pub Date : 2005
Teaching Note : Available
Countries : India
Themes: Business Strategy
Industry : Aviation
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"I was traveling around the world at the time and flew on
BA (British Airways), Qantas, and AA (American Airlines). I can safely say that
the level of service (at Jet Airways) was twice that of these major global
airlines."
- David Bromwich, a Jet Airways passenger, in 2002.1
"Naresh (Goyal) gave people the airline they needed; not
just what they wanted."
- Pradip Madhavji, former chairman of Thomas Cook, in 2003.2
Jet Airways' Successful IPO
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In March 2005, Jet Airways (India) Limited (Jet Airways) became the first Indian
airline to issue shares to the public, when it made a successful debut on the
National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE)
simultaneously. The much awaited Initial Public Offering (IPO) raised Rs. 1899
crore3, through the sale of 1.72 crore
shares (20 percent of the company's equity) of Rs.10 each. The issue price was
set at Rs. 1100, but the lowest price the shares were traded for on either of
the bourses was Rs. 1155. At the end of the first day of trading, the closing
price of the shares exceeded Rs. 1300, which was a gain of around 18 percent
over the issue price.
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A part of the amount raised through the IPO was expected to
be used to retire some of Jet Airways' high cost debts (primarily to the
International Finance Corporation and the Infrastructure Development Finance
Company), and the rest to fund the airline's ambitious expansion plans.
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Analysts said that retiring its high cost debts would
bring down Jet Airways' debt-equity ratio from around 5.4:1 before the
IPO to 1:1, which would prove to be advantageous to the airline in
securing further loans on favorable terms and in negotiating lease
agreements for new aircraft. Naresh Goyal (Goyal), Jet Airways' founder
and chairman, said there was a possibility of the airline looking at an
international shares listing in future if such a move was found to be
feasible.
Jet Airways' tremendously successful IPO further consolidated the
airline's position in the Indian aviation industry. It also proved that
the large number of low cost airlines (LCA) being set up in the country
found it difficult to affect Jet Airways' popularity with passengers4. |
Jet Airways' Strategy, Operations and Competitive Position
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