Continuing Jet Airways was equally expensive, says banker

Lenders say Jet Airways promoters led by Naresh Goyal failed to see the writing on the wall about the dwindling finances of the company. The fund crunch led to curtains coming down on one of  India’s best known airlines on Wednesday.

The Supreme Court quashing the February 12 circular of Reserve Bank of India, which  had allowed the conversion of debt into equity at Re 1, was the last nail if the coffin for Jet. Without that circular lenders were unable to convert the part of the debt of Rs 8,000 crore into equity. But the central bank failed to clarify on the pricing issue, nor did it come out with a new framework for resolution of high value debt. In the absence of a framework, the bankers were left with no choice but to hold the interim funding until the bidding process is over.

“Operating five aircraft is not a going concern. Continuing was also equally expensive. Five planes in operation where fixed expenses are for 123 aircraft,” said a senior bank official who is part of the consortium. “But a conclusion on the fate of the airline can only be drawn after the closure of bids on May 10,” the banker said. 

“It is everyone’s desire that the Jet branch remains. I wish the Jet promoters could read the writing on the wall. Lenders had been warning for the last five months,” the banker added.

Bankers are running the bidding process. Four bidders TPG Capital, IndiGo Partners, Etihad Airways and National Investment and Infrastructure Fund (NIIF) have been shortlisted and have been given time till May 10 to put in their bids after a due diligence. The lenders have not given any floor price.

Why were the bankers not fleet-footed after Naresh Goyal and his wife Anita Goyal exited from the airline? “This is a case where lenders have been very proactive. If we are still having interested bidders it is no small achievement,” added the lender.