On Tuesday, April 16, Jet Airways’ lenders met to discuss the future of the airline, after they failed to reach a consensus on emergency funding. Sources close to the negotiations say a shutdown may be imminent because the cash-strapped airline is currently able to run only a tiny fleet and faces fuel stoppage again.
Despite deliberating for an hour, the lenders were unable to decide whether or not to provide the airline with an emergency fund to the tune of Rs 1,500 crore for interim expenses.
Business Standard (BS) reports that the lenders did not want to infuse more money until they were assured of the credibility of the bidders who submitted Expressions of Interest (EoIs). Now, the airline has no cash and only a seven-plane fleet to its name. It is also paying the fuel company on a day-to-day basis.
Hence, Jet has announced that its international operations will be suspended until Thursday, April 18, because the airline wants to cut its losses.
Yesterday, Jet CEO Vinay Dube addressed employees and said, “The interim funding has not been forthcoming thus far. The current status of our engagement with the lenders and other related matters shall be placed before the board in the meeting scheduled for tomorrow morning, where the management will seek guidance from the board on the next steps forward.”
Several news outlets have reported that in today’s meeting, the Jet board is considering a temporary shutdown, among other options.
Majority Jet lender State Bank of India said, “The proposed equity conversion by banks, if any, will be undertaken as a transitory mechanism to facilitate the bidding-cum-sale process.”
However, the debt resolution process still provides a sliver of hope as bidders for the airline are still being vetted. A shortlist is expected to be released soon, says BS.
The airline’s lenders invited bids from companies to take over Jet, after Naresh Goyal stepped down from his position on the board.
However, after reportedly receiving five offers, the lenders were unhappy because they believed none of those bids were serious and lacked a long-term financial vision for the airline.
The lenders even extended the deadline to submit EoIs, so that companies like Etihad and Tata Group could vye for a stake in the company.
As Etihad has insider knowledge on how Jet functions because it currently holds a 24% stake in the company, the company may emerge as a top contender in the bidding process. However, the Tatas who control two other airlines—Vistara and AirAsia—have decided against bidding for Jet.
Although there is no official comment from the lenders, sources say that TPG Capital, Indigo Partners, and Investment and Infrastructure Fund Ltd. are among the bidders being currently vetted for the shortlist.
Financial and logistical troubles
Other than owing its lenders thousands of crores in debt, Jet is also suffering from logistical problems.
The Indian Oil Company (IOC) has already stopped fuel supply to Jet once and might choke the pipeline again soon, if dues are not cleared.
Jet carriers are also grounded all over the world. Most recently, a cargo aircraft flying from Amsterdam to Mumbai was grounded before takeoff. Jet’s service from Singapore has also ceased. Concerned lessors have also begun de-registering Jet’s carriers and reclaiming them.
Jet itself has warned customers of operational issues like delays and cancellations.
Minister of Civil Aviation Suresh Prabhu also tweeted that he has asked his department to review Jet’s increasing fares and cancellations and “take necessary steps to protect passenger rights and safety”.
Jet has been hit by competing airlines, as well. SpiceJet has secured the coveted routes to Colombo, Kathmandu, and Hong Kong from Mumbai; only Jet operated on these routes earlier.
SpiceJet has also claimed many other international destinations such as Colombo, Kathmandu, Hong Kong, Bangkok, Dhaka, Riyadh, and Jeddah.
Jet being grounded has also stalled the pricing war, allowing carriers to improve their ticket prices, says Mint. IndiGo has also been experiencing better yields.
However, even in the throng of confusion and uncertainty, Jet’s customer service is being praised by people who have encountered these logistical problems. The airline’s Twitter feed is flooded with messages of support and appreciation from customers.
Romit Parbatani said that Jet’s “excellent customer service” helped him resolve a ticketing issue.
Shivam Mishra said that the airline’s customer service was unmatched.
“You will rise under blue skies again with full fledged aircrafts… Thousands of customers are standing with you at this hard time”, he said.
Money Control adds that Jet’s stock has managed to stay afloat because investors are optimistic that the airline will be rescued and its prestige will be restored. The government has also said that it is trying its best to resolve Jet’s financial troubles, keeping in mind its 20,000 strong staff.
Rhea Arora is a Staff Writer at Qrius.