On Friday, April 6, adding to the ongoing debt resolution saga for Jet Airways, the Indian Oil Corporation (IOC) stopped fuel supply to the airline after not being paid. However, the Tata Group might provide relief by investing in the airline. Former Jet investor Etihad Airways has also expressed a renewed interest.
Reports say that Tata Sons, the majority shareholding company in the Tata group, might be interested in the debt-ridden airline after lenders began their hunt for new investors.
The Tatas, who already run AirAsia India and Vistara airlines, are planning to submit a bid for equity in Jet by April 6, the deadline for bids set by State Bank of India (SBI). However, a spokesperson for Tata Sons said the company does not comment on market speculation.
In another development, Etihad Airways, that previously wanted to dilute its investment in the airline, has now renewed its interest in Jets equity.
Etihad might be looking to purchase an additional 37% equity to increase its hold up to 49% from its previous 24% stake.
Senior advisors from Etihad and former Jet CEO Cramer Ball met with SBI officials on Friday, April 4. After this meeting, the lenders said that the deadline for bids for Jet is between April 6 and April 9.
The lenders intend to pursue the Bank-Led Resolution Plan for sale of stake in the company in a time-bound manner under the present legal and regulatory framework and intend to invite expressions of interest, said the lenders statement.
However, amidst all this good news, the Indian Oil Corporation (IOC) stopped its fuel supply to Jet because it has not been paid yet.
Effective from noon on Friday, April 6, IOC choked its oil supply to the airline currently resolving its financial crisis. Citing non-payment of outstanding dues, the state-owned oil company said it will not supply Jet with any more fuel.
Jets financial troubles
After Air India and Kingfisher, Jet Airways joined the ranks of cash-strapped airlines in India.
Jet has defaulted on its loans and staff salaries. In 2018, the airline only paid 84% of its employees, who have since threatened to strike if a debt resolution plan is not finalised soon.
As Jet failed to repay its loans, its profitability also decreased and it reported consecutive losses worth Rs 732 crore.
From a lack of funding to standard problems ailing the aviation industry, Jets financial situation worsened over the next months.
Two of the major reasons the Indian aviation industry is financial turbulent are the depreciating rupee and a price war among all airlines.
Airlines have to make several expenditures in the US Dollar such as rent in foreign airports, refuelling in transit, and maintenance of aircraft overseas.
Compounding the issue is the fierce competition in the market that prevents them from raising ticket prices because no airline owns enough market share to hike fares.
To Jets relief, SBI then stepped in with other lenders to hold debt resolution talks and rescue the airline from bankruptcy. This process has been tedious, as well.
Naresh and Anita Goyal, co-founders of the airline, were initially unwilling to relinquish control of a company they built from the ground up. However, the Goyals have since resigned from their position on the Jet board.
Etihad too expressed concern about the delay in a resolution plan and said it wanted to sell off its 24% stake in the company to the lenders.
Etihad has had its own financial issues and needs to restructure in a way that is profitable to itself. Attaching itself it a flailing airline might not be a good business decision. However, it seems that Etihad is reconsidering its decision.
While it looks like the airline will get rescued, ordinary Indians who belong to Jets staff will also keep their jobs and hopefully be paid their salaries regularly moving forward. The pilots union has also found a strong voice in the matter and will safeguard aviation staffs interest in the future.
Rhea Arora is a Staff Writer at Qrius