Case Study: HR Problems at Jet Airways:

Coping with Turbulent Times in the Indian Aviation Industry

The case is about the retrenchment drama that unfolded in one of India’s 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. We have created high
morale for our people. Our
Jet’s chairman Naresh Goyal (Goyal) reinstated the employees a day employees believe in the
later saying that he was not aware of these sackings. The Indian company. They believe it’s
aviation industry was going through a tough phase and experts felt their company. There’s a
that it was in the interest of the company to retrench employees to feeling among employees
remain competitive. that if the company makes
money, it’s their money and
Media Reaction:
if the company loses money,
Experts largely felt that Goyal had capitulated under pressure from that’s their loss."
external parties while others felt that all may not be well with the
Naresh Goyal, Chairman, Jet
organizational communication mechanisms at Jet.
Airways (India) Limited, in
"While the mishandling of the Jet Airways sacking and July 2007.
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
India’s 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 government’s 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

Assignment Case Study given by Parveen S. Huda Page 1

In October 2008, Jet Airways (India) Limited (Jet), one of India’s leading domestic airlines, decided to lay
off more than 1,000 employees to streamline its operations. The retrenchment was the second phase of
its trimming operations.

The first phase, which took place a day earlier, saw the airline showing the door to 850 cabin crew
members. The second phase of retrenchment included employees from all operations - cabin crew,
pilots, ground staff, airport services staff, and employees from management departments.

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.

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.

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.

Assignment Case Study given by Parveen S. Huda Page 2

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.

The Retrenchment Drama Unfolds

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 month’s
remuneration...

Reasons for Retrenchment

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.

Turbulent Times for the Indian Aviation Industry

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.

The Debate Leading to the Reinstatement of Employees

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...

Massive Salary Cuts Follow

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.

Assignment Case Study given by Parveen S. Huda Page 3

1. Analyze the HR problems faced by Jet Airways in 2008.

2. Discuss various strategies used by Jet Airways management related to hiring, firing, and
compensation management.

3. Explain the rationale behind Jet’s decision to lay-off employees and the reasons behind its later
decision to take back the sacked employees.

4. Explain how environmental variables could affect a company’s HR strategies.

Assignment Case Study given by Parveen S. Huda Page 4