Airline halts operations after lenders refuse to infuse Rs 983 crore of interim funding
About 25 years after its first flight, Mumbai-based Jet Airways on Wednesday “temporarily” ceased its operations as lenders refused to infuse Rs 983 crore of interim funding. The airline flew its last scheduled flight S2 3502 from Amritsar to Mumbai at 10:20 pm.
An airline official said the decision was taken after the lenders led by State Bank of India (SBI) on Tuesday night expressed their inability to provide interim funding of Rs 983 crore. “Because no emergency funding from the lenders or any other source of funding forthcoming, it will not be possible for the company to pay for fuel or other critical services to keep the operations going,” the airline management informed the employees in an email. The management also told the employees that the sale process may be time consuming, and therefore they have no answer about the future of employees till the entire sale process gets over.
The lenders, on their part, have told the airline management that the Expressions of Interest (EoIs) have been received and bid documents have been issued to the eligible recipients on Wednesday. Sources claim that the lenders are of the view that mere EoIs are not enough for them to release the interim funding as they want assurance before funding. The bankers had invited EoIs for the sale up to 75% stake in the beleaguered airline. Four investors have cleared the qualification process. The lenders will take the airline to National Company Law Tribunal (NCLT) if the funding process does not fructify by June end. The airline management after deciding to shut the operations, in a regulatory filing, said, “The airline is now left with no option but to await the bid finalisation process by SBI and the consortium of Indian lenders.”
Naresh Goyal founded Jet Airways, which first started operations in May 1993, has been facing deep financial stress since past several quarters and has been seeking funding for its operations. The airline has a debt in excess of Rs 8,500 crore and till Wednesday had only five operational aircraft out of the 119 aircraft it had in its fleet just a couple of months back. Further, the airline, which has a staff strength of over 16,000, has been delaying salaries with pilots and maintenance engineers not been paid since January. “Though we knew that it will may happen some day. But now the news (of airline shutting) is in our face. I could not gather the courage to even go home,” said a Mumbai based aircraft maintenance engineer.
According to industry observers, Jet has been facing headwinds in the past numerous quarters. High fuel prices coupled with “unsustainable” low fares, volatility in foreign exchange, stiff competition from low-cost carriers including IndiGo, GoAir and SpiceJet, increased maintenance and overhead costs, have all forced the airline to fly into losses.
As per the experts, the carrier has also been losing market share. Few other analysts claim that Jet Airways’s decision to partner with Etihad Airways also did not go in its favour, as it was left being a feeder to its Abu Dhabi-based partner. The drop in the market share has been drastic in 2018-2019 with the domestic market share coming down to 11.4% in March 2019.
Meanwhile, the civil aviation Secretary Pradeep Singh Kharola who took a stock of the situation in the afternoon is likely to convene a meeting with the airport operators on Thursday in the first half of the day and the airlines in the second half to address emergency issues regarding capacity, slots and passenger convenience.
Jet Privilege Pvt Ltd, which is a separate entity part of the Etihad Aviation group, said the JPMiles (loyalty programme) remains intact, though fliers can redeem it with its partner airlines and companies. Jet has long been attempting to leverage its frequent-flier programme which it has in partnership with Etihad Airways, for a valuation of around Rs 3,000-4,000 crore.
Describing it the a setback to Indian aviation, Ashwani Lohani, chairman and managing director, Air India, said, “While sustained mismanagement definitely contributed, the fact remains that in the entire aviation ecosystem, it is the airline that invariably remains at the receiving end while all other stakeholders make money.”
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "Jet Airways")
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}