The Directorate General of Civil Aviation says cash-strapped Jet Airways is now operating only 41 aircrafts, which is just a third of its original fleet of around 120. The company had placed orders to buy 225 Boeing 737 Max planes, but is in immediate needs of funds. It has delayed salaries to employees, not paid lessors and also could not meet the interest payment to debenture holders on Tuesday.
On Tuesday, Union Aviation Minister Suresh Prabhu had sought an immediate report from the DGCA on the Jet’s compliance issues.
“Directed secretary, ministry of civil aviation to hold an emergency meeting on grounding of flights by Jet Airways. Advance bookings, cancellation, refunds and safety issues, if any,” Prabhu said.
DGCA says the situation is dynamic and more aircraft could grounded in the coming weeks.
Promoter Naresh Goyal, who holds 51 per cent stake in Jet Airways, had last week sent an SOS to Etihad CEO Tony Douglas seeking Rs 750 crore in immediate funding. But, Etihad’s board meeting last week remained inconclusive. Rather, new reports suggest that Etihad, which holds 24 per cent stake, may be even willing to exit from Jet Airways. This could partly be because the Gulf carrier is itself not in a great health; it reported $1.28 billion loss in 2018. It has also reportedly had reservations over some terms in the memorandum of understanding (MOU) for the proposed resolution.
Etihad has so far not commented on the same, since a joint statement was issued along with Jet Airways on February 25. In that statement, the two airlines had said that Jet’s key stakeholders were working towards a finalisation and subsequent implementation of the bank-led provisional resolution plan (BLPRP) that was approved last month.
However, there has been no breakthrough yet, despite the BLPRP being approved by the board of directors of Jet Airways as well as its shareholders. The BLPRP includes fresh equity infusion, debt restructuring and sale and leaseback of planes. If implemented, the consortium of lenders led by State Bank of India would become largest shareholders in Jet Airways, which has a gross debt of Rs 7,654 crore. The BLPRP estimates a funding gap of Rs 8,500 crore, including proposed repayment of aircraft debt of Rs 1,700 crore.
With Parliamentary elections around the corner, the government would not want to see a large airline crash. Typically, lenders can take defaulting companies to the National Company Law Tribunal or NCLT for bankruptcy resolution. They haven’t done so in the case of Jet Airways till now. But, each passing day that new funds are not secured from existing or new investors, banks’ options will only reduce.
Last week, bankers had sounded optimistic that a resolution could be finalised in a week. All eyes will be now on whether an agreement can be reached among the key stakeholders and the lenders this week.
