Creditors out of millions of rupees, unpaid employees, canceled flights and unhappy passengers. Airline failures are messy and a major inconvenience. One of the most known domestic aircraft carrier in India, Jet Airways is neck-deep in major soup, in a second call of rescue. The first was in 2013, when it was hit with £900 million of debt and found a new investor in Etihad Airways. The infusion of £360 million gave the airline relief, along with reduced operating losses.
The airways was founded in 1993 by Naresh Goyal who claimed to be an NRI from London. However, his NRI status is yet to be cleared as he has changed his stance several times before claiming to be a resident of Germany, Britain, and even Dubai. It took Goyal almost 12 years to start their international operations in 2004. Soon the company grew big and become one of the top competitors in India and the stock market value of the airlines shot up exponentially.
In a staggeringly short time, Jet expanded their business in a very short time after 2004, raising many eyebrows. They put a tough competition to Sahara and finally in 2007 they decided to take over the Sahara Airlines. Later in 2008, Jet started their new venture called the Jet Lite where they claimed to provide flight service in very economical rates. In 2009, they started another company called Jet Connect with a same claim of providing cheap air service.
Now 25 years later, the same aircraft company has come to a verge of bankruptcy. With nearly 300 flights and 74 destinations, Jet is today loss ridden and grabbing at last straws.
Bailout plan to be finalised in a week
Armed with a £150 million bailout plan, lenders headed by SBI has stepped up efforts to keep afloat cash-strapped Jet. The lenders will now take over more than half the company's shares, its management and board, even as they look for a new strategic investor. The lenders will initiate a bidding process on April 9 that will close on April 30. They hope to find a new investor by June end. As part of the resolution plan, banks will be issued 114 million fresh equity shares for Re 1 that will collectively give them a 50.1 per cent shareholding in Jet.
Goyal's stake will come down to 25.5 per cent from 50.1 per cent. Etihad, which owns about a quarter of Jet, will be left with 12 per cent and one of the Abu Dhabi-based carrier's two representatives on the board, Kevin Knight, will step down. Etihad's board meeting on March 31 is critical to its final decision on the Indian carrier. In its statement, Jet said, “The two nominees of the promoter and one nominee of Etihad Airways will continue to be on the board. Two lender nominees will be inducted to its board, subject to the receipt of requisite approvals.”
An “interim management committee” led by the lenders will be created to manage the daily operations and cash flow of the airline, the statement said. Meanwhile, Jet's lessors have been convinced to let the airline resume operations with grounded aircraft. Jet has grounded a majority of its fleet but hopes to get up to 75 per cent of it back in the air in 3-4 weeks. “The lessors understand that they also need to be part of a credible plan that ensures long-term sustainability for the airline,” said Jet’s CFO Amit Agarwal. “The exit of the main promoter from the board is on expected lines. The new board and the chairman must demonstrate confidence across all stakeholders. I see lenders’ decision as high-risk and not high-reward situation,” said Kapil Kaul, south Asia CEO of Sydney-based consultancy CAPA-Centre for Aviation.
Mallya pouts as banks swoop in to save Jet
Embattled liquor baron Vijay Mallya has lashed out at public sector banks for “double standards” under the current NDA regime for their intervention to bailout Jet while the same lenders made his Kingfisher airlines “fail ruthlessly”. In a series of tweets in reaction to banks led by State Bank of India taking over management control of troubled Jet, Mallya said, “Only wish the same was done for Kingfisher.” He added, “Happy to see that PSU Banks have bailed out Jet Airways saving jobs, connectivity and enterprise.” He also said, “The same PSU Banks let India's finest airline with the best employees and connectivity fail ruthlessly. Double standards under NDA.”
Currently facing extradition to India from London, Mallya lamented that his efforts to save Kingfisher was “not recognised and instead slammed in every possible way.” He claimed, “I invested over £400 million into Kingfisher Airlines to save the company and its employees.” He also ranted against the BJP for differential treatment meted out to Kingfisher and Jet. Mallya said, “BJP spokesman eloquently read out my letters to PM Manmohan Singh and alleged that PSU Banks under the UPA Government had wrongly supported Kingfisher Airlines.”
He also said, “Media decimated me for writing to the current PM. I wonder what has changed now under the NDA Government.” Mallya reiterated his offer to pay off dies through his assets. “And I repeat once again that I have placed liquid assets before the Hon'ble Karnataka High Court to pay off the PSU Banks and all other creditors. Why do the Banks not take my money. It will help them to save Jet Airways if nothing else.”
Yet another flight to Bhuj canceled
The crisis has adversely impacted the industries in Kutch as the country's largest district in terms of area has been cut off from India's financial hub, Mumbai. Jet Airways suspended three flights from Kutch district headquarters Bhuj till April 30 with immediate effect. Kutch businessmen are know to be frequent fliers to Mumbai. But with suspension of the Jet flights, they are now only left with one other option, that is Air India.
The Airport Authority of India (AAI) reveals the occupancy rate in flights originating from Bhuj was high. Bhuj Airport director Navneet Kumar Gupta said, “The jet has informed us that they are suspending operation till April 30. They used to fly Boeing 737 which has capacity to carry 170 passengers and it was operating with at its full capacity. IndiGo has the approval to start operation from Bhuj airport but they have not started it yet.”
President of Bhuj Chamber of Commerce and Industry Anil Gor said there are many Kutchis who have families in Mumbai who come to their native villages frequently. There are several Kutchis who have settled abroad and take Mumbai connecting flights. “Most of the industries set up in Kutch after the 2001 earthquake have headquarters in Mumbai and the officers of the companies frequently visit their production facilities,” Gor said.
