After much fanfare about a four-party alliance between former CEO Naresh Goyal, AdiGro Aviation, Hinduja Group, and Etihad Airways to rescue Jet Airways, the airline might still be at the risk of a permanent shut down. Reports says that the Hinduja Group and Etihad might pull out of the Jet Airways deal to revive the struggling airlines.
An anonymous source with knowledge of the bidding process told Mint that the Hinduja Group promoters “feel that it’s too risky for them to get involved (with Jet Airways) at the moment, due to ongoing government investigations and the recent insolvency pleas submitted by operational creditors at the National Company Law Tribunal (NCLT).”
The source is referring to the investigation into Naresh and Anita Goyal, the airline’s former co-founders, for alleged “suspicious” transactions found in Jet’s accounts.
The Ministry of Corporate Affairs issued a circular barring the Goyals from travelling abroad, and in May, they were forced to de-board an Emirates plane that was already on the taxiway. Reports said that the Goyals were en route to London, where financial defaulters like Nirav Modi and Vijay Mallya currently reside.
The Hinduja Group is also hesitant to invest in Jet because two of the airline’s creditors—Shaman Wheels and Gaggar Enterprises—have moved the NCLT to recover their dues.
Business Today reports that the two creditors are waiting for the NCLT to accept their petitions against Jet. If the NCLT allows the case, Jet’s other creditors will also need to join the case and get their money back because insolvency proceedings against the airline will begin.
The NCLT has two weeks to decide whether or not to admit the petitions. In the meantime, Jet’s share price plummeted almost 13% on Tuesday, June 11.
Hinduja-Etihad-Goyal-AdiGro alliance tries to save Jet
The bidding process has been long and tedious, so much so that Etihad, which is a minority investor, had initially decided to sell off its shares to the lenders and withdraw from the airline entirely.
But, Etihad renewed its interest on the condition that it would only retain its 24% stake in Jet and the lenders were solely responsible for finding new investors.
In May, some bidders confirmed that they were a part of a larger consortium that was in talks with the lenders.
Etihad Airways, AdiGro Aviation, Hinduja Group, and Naresh Goyal were hammering out a rescue plan for the airline. However, there were no details on what their equity arrangements would look like.
Now, Business Today reports that the investors have offered to take over the airline entirely and remove equity of current investors, including minority shareholders. This means that the lenders will need to give up 60% of their loan repayments.
A report in Money Control says that Prime Minister Modi’s office has allowed lenders to take up Hinduja and Etithad’s offer for a haircut. But even that offer is contingent on Jet not being in any legal trouble for fraud.
What will happen to Jet’s employees and pilots?
While the company has been temporarily shutdown and the Goyals are being investigated for fraud, thousands of employees have been struggling.
In April, a 43-year-old Jet employee Shailesh Singh died by suicide in Nalasopara. The employee was already battling cancer and the stoppage of income added to his “frustration”, says a neighbour.
Like Singh, 22,000 employees, contractual and full time, have been struggling to make ends meet.
An employee told Quartz, “Bills are just piling up. We have to pay for our children’s school and college fees, EMIs and what not. The situation is so terrible that many of my colleagues have taken up other jobs at pay cuts of 40%”.
When Jet announced it was shutting down, these employees protested in Mumbai and Delhi and appealed to the prime minister to step in and save their jobs.
Employee unions also wrote to the finance and aviation ministries asking them to intervene. They also offered to buy the airline via the employee stock option programme and by putting together employee salaries. However, Jet’s cost is still too high.
Jet’s pilots have been looking for jobs in other airlines like Qatar Airways and Korean Air. Spicejet, Jet’s competitor, hired 500 employees.
“We are giving first preference to those who have recently lost their jobs due to the unfortunate closure of Jet Airways” said Spicejet CMD Ajay Singh.
Tata’s Taj Mahal Palace Hotels and Express Inn Nashik also offered to employ the crew. In April, WeWork said it was “opening up job opportunities for Jet employees” and invited resumes. Twitter users have also stepped up and offered Jet’s laid off staff jobs.
AdiGro has proposed that Jet can restart operations with 9,000 employees, as long as upper management is willing to take a 25% cut in salaries and other employees take a 10% cut.
Rhea Arora is a Staff Writer at Qrius.