As India started its six-week-long general election process last week, the government of prime minister Narendra Modi launched an investigation in the chances of survival of debt-stricken
carrier Jet Airways.
The airline last week cancelled most of its international flights to Europe and Asia, after cargo handler Worldwide Flight Services (WFS) seized one of its B777s at Amsterdam Schiphol Airport because of unpaid fees, further deepening worries about its survival and the fate of its 23,000 employees.
The Mumbai-based carrier and India's second-biggest airline by market share has been forced to ground the majority of its fleet after months of defaulting on loans and struggling to pay lessors and staff. The airline is believed to now be operating just 16 planes out of a fleet of 119, which is below the 20 required by Indian aviation regulators to fly overseas.
No white knight in sight
Press reports said that aviation minister Suresh Prabhu tweeted on Thursday that his ministry would "review issues related to Jet Airways" and "take necessary steps to minimise passenger inconvenience and ensure their safety," as efforts by a consortium of lenders led by the State Bank of India to sell a major stake - reported to be as much as 75% - in the struggling airline initially met with mixed results.
The Economic Times reported that five companies had submitted expressions of interest (Eo-Is) in picking up stakes in Jet Airways. However, the lenders have extended the initial deadline by two days, in the hope that major shareholder Etihad Airways, which hasn’t submitted an EoI, will show interest.
Although the names of the potential investors could not be ascertained, the Economic Times report quoted sources as saying that the Eo-Is were either “non-serious” or lacked critical details on how the bidders would recapitalise Jet Airways. The Eo-Is are non-binding and any interested parties will have until April 30 to make a formal bid, the paper added.
Debts of more than US$1.2 billion, Reuters
The State Bank of India-led group of lenders have been trying to persuade Etihad, which owns 24% of Jet Airways, to increase its investment to help revive the carrier. Etihad though has been insisting on an exemption from the takeover norm that requires investors to make an open offer for a further 20% stake if they exceed a 25% threshold.
A Reuters report on the matter said that the airline has debts of more than US$1.2 billion and owes money to “banks, aircraft lessors, suppliers, staff,” amongst others. Since January, Jet Airways is said to have defaulted on its loans three times.
Short-term funding required
In a related development, Jet Airways' founder and chairman Naresh Goyal, who in March announced he would step down from the airline’s board, told lenders that he will pledge the rest of his shares to them on condition they release the promised interim loan funding of Rs 1,500 crore without delay. Goyal owns 51% in the airline, but has pledged 31.2% with lenders. The response of the lenders to the proposal is not known.
Meanwhile, Jet CEO Vinay Dube in a letter to employees said the airline is working to secure interim funding to get more planes flying. It also supports the resolution plan by lenders, adding, “There is hope that we will recapitalise the airline.”
However, a lawyer representing Jet Airways' pilots last week wrote to Mr Dube, saying they would be forced to “resort to all constitutional and legal methods” if the outstanding salaries weren’t cleared by April 14 and future salaries by the 1st of each month.
Nol van Fenema