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| Edited By: DNA |Source: DNA |Updated: Jan 18, 2019, 07:05 AM IST
Jet Airways, the second-largest airline, is in the red, and the possibility of a bailout will come with riders.
What makes matters worse is the stance taken by its equity partner Etihad, which not only intends to raise its stake from 24 per cent to 49 per cent, but also wants certain norms to be relaxed if it is to infuse more equity in the airline.
In 2013, when Etihad joined hands with Jet in what can be called the first foreign investment deal in domestic airlines, it paid Rs 754.74 per share. Now it wants controlling stake by paying Rs 140-150 per share. Though India’s air passenger traffic has grown by at least 16 per cent annually over the past decade — it is now the third largest aviation market in the world — that growth hasn’t translate into profits.
SpiceJet had almost sunk in 2013 before government intervention pulled it back. IndiGo’s health is looking precarious and the story of Air India is too well known to bear repetition here. Jet has been ill for some time but now the problems have become too big to be ignored.
The fate of Indian aviation sector — with its high capital expenditure and low-profit margins — is also inextricably linked to international factors such as depreciation of the rupee against the dollar, and rise in costs of aviation turbine fuel.
Moreover, the intense competition among domestic carriers to get a slice of the action has made some airlines unduly adventurous. Coming back to Jet-Etihad, the latter will definitely try to drive a hard bargain, even trying to push Naresh Goyal out, but that won’t guarantee that Jet would regain its robust health. A “comprehensive resolution plan” for the airline’s turnaround appears far-fetched at this point.
