Embattled Jet Airways, once India’s largest private carrier, grounded itself late-night on 17 April (Wednesday) albeit temporarily after its lenders rejected pleas for an emergency fund infusion.
The airline, carrying a $1.2 billion debt, had been in a financial hole for the past few months.
The final straw was the failure of an emergency loan of over $ 200 million from its lenders for essential operations on an expense-to-expense basis to come through.
“The airline has been left with no other choice today but to go ahead with a temporary suspension of flight operations,” Jet Airways said in a statement.
Jet has in recent weeks been forced to cancel hundreds of flights and to halt all flights out of India as money ran out.
At its peak, the full-service airline operated over 120 planes and more than 600 daily domestic and international flights.
It has over 16,00 employees many of whom including pilots and technical staff have not been paid for months.
In its statement, the airline thanked its customers for their support over 25 years and apologised for the “disruption to the travel plans of all its guests”.
“Since no emergency funding from the lenders or any other source is forthcoming, the airline will not be able to pay for fuel or other critical services to keep the operations going,” the statement added.
An official of the government-run State Bank of India (SBI), the lead banker of the consortium of lenders overseeing the company since its founder Naresh Goyal was forced to exit a few weeks ago, said a request for $58 million from Jet to keep itself temporarily afloat had been rejected.
The airline said it would continue to work with its banks who are trying to identify an investor to buy a majority stake and try to turn Jet around.
SBI last week accepted expressions of interest for an up to 75 per cent stake. The process is expected to end by 10 May.
Goyal has already withdrawn from making a bid for the company.
A Reuters report quoting a leading business TV station said that Jet’s lenders were set to invite binding bids from four shortlisted suitors that include private equity firms TPG Capital and Indigo Partners, Indian wealth fund National Investment and Infrastructure Fund (NIIF), and Etihad Airways, which already owns a minority stake in the airline.
Shares in the company have tumbled about 60 per cent in the last year but Jet still has a market capitalization of nearly $400 million as investors have clung onto hopes of a rescue deal being clinched, the wire agency reported.
Jet’s CEO Vinay Dube, in a letter to employees on Wednesday posted on Facebook, said the sales process would take some time and could throw up several more challenges but he was “confident Jet Airways would fly again”.
Intense competition from low-cost carriers, higher oil prices, escalating fuel taxes and a weak Indian rupee against the dollar are thought have exacerbated Jet’s financial woes.
The management style/strategic decisions taken by Jet’s founder-chairman are also thought to have contributed in bringing Jet to its knees.
This most notably includes buying floundering domestic carrier Sahara Airlines over a decade ago despite opposition from his own senior management team,
If no buyer can be found for the airline, it could leave thousands jobless.
That would have a political fallout as unemployment is a major issue raised by the Opposition against the Narendra Modi regime in the ongoing Indian general election.
Jet’s pilot union has iterated it has appealed to everyone including Prime Minister Modi to help out but to no avail thus far.
A series of meetings on trying to work out a way in which Jet stays afloat in one form or the other have been called by the Prime Minister’s Office (PMO) over the past two weeks.
India’s Civil Aviation Ministry too has said it is closely monitoring the process of finding a buyer for the airline and indicated it was willing to extend all possible help.
Fugitive liquor baron Vijay Mallya, former owner of the now-defunct Kingfisher Airlines and currently fighting extradition to India from the UK, has also stepped into the row.
Extending solidarity to Jet Airways and its founder, he has in a series of tweets attacked the government for “discriminating between public sector and private airlines”.
A Jet collapse would also be a potential blow to Boeing Co, which is already grappling with the fallout of two recent fatal crashes involving its 737 MAX aircraft. Jet has more than 100 of the 737 MAX planes on order.