Lenders are likely to provide the airline interim funding after prodding by the government
The Jet Airways crisis is nowhere near solution with minority partner Etihad continuously changing its stance, but the short-term rescue could come from the government, which has asked the public sector banks to bail out the floundering airline ahead of elections.
Banks are likely to provide an interim funding of Rs 800 crore, a substantial part of the Rs 1,000 crore that the cash-starved airlines requires to weather the storm.
Jet Airways, which has a debt of Rs 8,400 crore, is facing resistance from Etihad to arrive at a resolution plan with the lenders.
"The shifting stance of Etihad is creating a problem for lenders. The biggest grouse for Etihad is that it will not be able to hike its stake beyond 24.9% after market regulator Securities and Exchange Board of India refused to give a special dispensation to avoid triggering the takeover code," said a senior bank official.
Etihad also wants Jet Airways founder-chairman Naresh Goyal to exit the airlines, which is also not likely to happen, banking sources said.
State Bank of India (SBI), which is leading the negotiations with other banks, had set up a resolution plan where the lenders and the National Investment and Infrastructure Fund would acquire a 51% stake in Jet Airways and later dilute it through a rights issue.
With pressure mounting on the central government due to the apparent problems at Jet Airways, aviation minister Suresh Prabhu on Tuesday intervened and directed the aviation secretary and Directorate General of Civil Aviation (DGCA) officials to review the grounding of planes by the airline, advance bookings, cancellations, refund and safety issues. The airline officials were called and asked to brief about the situation to the aviation ministry and DGCA.
According to DGCA officials, the current availability of aircraft in the fleet for operation is 35, though the numbers may go further down in coming weeks if the airline is not able to get immediate funding. The Goyal-promoted full service carrier has grounded more than a third of its entire fleet leading to scores of flight cancellations on account of non-payment of dues to the lessors. "We are keeping an eye on the situation," said a senior DGCA official.
In an investor presentation, the company said that it has defaulted in repaying the working capital loan instalments, including interest due to Indian banks, which has partly been paid in January 2019, and there are substantial payments overdue to creditors. These conditions, together with four successive quarters of losses due to high fuel prices and fluctuating currency rates, coupled with tight liquidity conditions, pose serious challenges to the company, indicating the existence of material uncertainty that may cast significant doubt on its ability to continue as a going concern. The company said it has chartered out a turnaround plan which involves a balance sheet restructuring to ensure solvency through sustainable cash flows.
DGCA in a statement said that it has instructed the airline to comply with the relevant provisions of the applicable civil aviation requirements for facilitation of passengers regarding timely communication, compensation, refunds and providing alternate flights wherever applicable.
Meanwhile, the umbrella body of the domestic pilots of Jet Airways in its annual meeting held in Mumbai on Tuesday threatened to stop flying from April 1, if the salary dues are not cleared by the end of this month. The senior airline management, pilots and others have not been getting full salaries for past few months, despite repeated assurances by the Jet Airways management.
PLUNGING FAST
- Rs 8,400 cr – Debt with Jet Airways
- Rs 1,000 cr – Needed by the floundering airline
- 24.9% – Stake of Eithad Airways in Jet
- 35 – No. of operatinal aircraft of Jet Airways
The Etihad hurdle
- Etihad will not be able to hike its stake after Sebi refused to give a special dispensation to avoid triggering the takeover code
- Etihad wants Jet Airways chairman Naresh Goyal to exit the airlines, which is also not likely to happen
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