Why Do Acquisitions Prove Fatal For Airlines?

Another good and leading airline that seems to be crashing is Jet Airways. The reason as always given is the rising cost of Aviation Turbine Fuel and the usual story of high taxes.

But never quite understood the Jet Airways downhill story. Before 2012, it was the leading airline and it was making operational profits. After 2014 started the decline. This was two years after it sold its 24% stake to Etihad in 2012 for Rs 2,000 cr.

So in an environment when other airlines like Air India are on the uphill post its restructuring and Indigo and others are not very bad off, what makes Jet suffer the most. We know that its entry into the Gulf routes did not work as it should. But is that the complete reason?

Why is it that post acquisitions, airlines, seem to come crashing down. Air India went into losses post Indian Airlines takeover, Kingfisher post Air Deccan takeover and now Jet Airways.

What does this experience in the aviation sector tell us or how do management schools look at this trend?

On one hand what kind of due diligence is done to ensure that stake sales and acquisitions are indeed beneficial in the long run?

On the other are we to believe that airlines cannot create any kind of buffer for fluctuating ATF prices?

It is important to address these issues as there is a whole generation of youth who come into this industry, give their heart and soul to make a career here and suddenly everything erupts in the air. Jobs are lost, salaries remain unpaid and so many go unemployed after putting in the best years of their life.

We have seasoned economists talking about how the government should privatise Air India and that is the best for everyone. Will that indeed solve the problem when private airlines are themselves bleeding?

Where lies the solution?