Jet Airways will likely be involved in bankruptcy proceedings as its lenders are unable to find serious bidders. The cash-trapped airline is also receiving pressure from its pilots and staff to find sources of funding. The lenders have now extended the deadline for bidders until May 10.
Previously, over five companies had proposed bids to takeover Jet. Etihad Airways, TPG Capital, Indigo Partners, and National Investment and Infrastructure Fund Ltd. (NIIF), were among the bidders who submitted expressions of interest (EoIs) that were not binding.
However, the lenders led by State Bank of India (SBI) were unhappy as the bids did not elaborate on any long-term rehabilitation plans for the airline.
Following an inconclusive bidding process, on April 17, Jet Airways announced that it was temporarily shutting down because it had no funds to stay afloat.
Jet Airways CEO Vinay Dube said, “With deep sadness and a heavy heart we would like to share that, effective immediately, we will be suspending all our domestic and international flight operations.”
The Economic Times reported that the bidders still seem uninterested in following up on their previously submitted EOIs.
Etihad Airways, TPG Capital, and Indigo Partners have not signed the required non-disclosure agreements. Other than NIIF, no other bidder has analysed Jet’s financial documents either, says ET.
A source who spoke to Business Standard said, “Companies that had submitted initial expressions of interest are not following up with binding bids.”
ET says that a reason for this reluctance is that Jet is losing its competitive edge as the country’s largest airline and investors are unwilling to reduce their loan repayment amounts.
The lenders have now extended the deadline to May 10 for any more serious bidders.
Jet pilots and staff strike
If Jet is unable to attract serious bidders, it’s 22,000 strong staff will be facing unemployment very soon. After the airline announced it was temporarily shutting down, many pilots and staff members protested in Delhi and Mumbai.
All India Jet Airways Officers & Staff Association (AIJAOSA) wrote a letter to Prime Minister Mod urging him to intervene and save their jobs.
“We sincerely appeal to you at this hour of crisis and request your urgent intervention to define a blueprint of revival and consolidation thereby avoiding loss of employment and critical damage to the aviation industry of India”, wrote President of AIJAOSA Kiran Pawaskar.
The pilots even took to Twitter under the #SaveJetAirways hashtag to appeal to politicians and the public to take heed of their financial crisis.
Now, the airline’s mediclaim policy has also expired as there are no funds to renew it. It has urged employees to find their own source of insurance.
“In the absence of any emergency funding from the lenders or any other source of funds forthcoming in the near future, we find ourselves facing a situation where we are not able to fund the premium of our Group Mediclaim Policy. The policy lapses on the midnight of April 30… These circumstances are not of our doing and much as we would wish to do things differently, we are left with little choice,” said Jet Airways Chief People Officer Rahul Taneja, according to BS.
Taneja added that the airline is still attempting to find funding sources to revive its fleet.
History of Jet and its financial crisis
Jet Airways has been the country’s largest airline for 27 years after it was founded in 1992. By 2008, Jet had first-mover advantage on international routes between Mumbai and London, Chennai and Toronto, and Dubai and Delhi and Mumbai, and Mumbai and San Francisco. It was also the only Indian airline to fly between Mumbai and Colombo, Kathmandu, and Hong Kong, until recently.
However, in the past few years, the airline’s debt mounted and resulted in a failure to repay loans worth thousands of crores.
After the lenders led by SBI stepped in, former Jet CEO and founder Naresh Goyal and his co-founder and wife Anita Goyal both stepped down from their positions to make way for new management.
Jet also failed to pay employees their salaries or contractual partners their dues. It’s financial trajectory mirrored that of Air India and Kingfisher, two other major Indian airlines to be grounded after defaulting on loans.
While the process has been long and arduous, Jet’s employees and lenders are holding out hope for the mater to be resolved soon.
The efforts on the part of the lenders has also been aligned with due process and is set against the background of greater accountability that the RBI wanted to ensure in February 12 circular.
Other known defaulters such as Vijay Mallya, former CEO of Kingfisher, and Nirav Modi, a diamond merchant, are currently battling extradition proceedings in London, as India’s financial institutions try to hold them accountable.
Rhea Arora is a Staff Writer at Qrius
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