Bosses and employees of the beleaguered Indian carrier Jet Airways are waiting with bated breath for an investor. The State Bank of India (SBI) needs to secure a rescue deal as soon as possible for the airline to resume flights and pay its staff.
Jet Airways was last month forced to cancel all of its operations. This followed the rejection of its demand for a stop-gap loan of $217 million from lenders.
According to Reuters, lenders finally drew a line in the sand because they believed continued ‘piecemeal’ funding simply shores up gaps. They wanted a solution that would tackle the bigger issues faced by the airline.
Meanwhile Jet airways salaries remain seriously backlogged.
Despite its paring back daily flights to just 35-40 in the days leading up to the decision, they still couldn’t make ends meet. Jet had to cease operations due to a lack of money, according to The Economic Times.
The has-been giant
Once India’s largest private airline, in its heyday Jet Airways operated over 120 planes on 600 daily flights. But low cost airlines such as SpiceJet and IndiGo have felled the giant from its perch.
The company’s depleted market share, coupled with a rise in oil prices and a weak rupee were just too much. They set Jet on a downward spiral in 2014, according to Satish Nandgaonkar of the Bangalore Mirror.
And Jet’s managers seemed then unwilling to alter their trajectory, despite obvious competition from low cost carriers.
‘Jet made no effort to restructure costs and reduce fares,’ writes Nandgaonkar in 2018. ‘They continued to believe that they had a better product that people would pay a premium for.’
Beleaguered staff left penniless
If Indian carrier Jet fails to attract a buyer by the middle of May this year, its collapse could be made permanent. This would spell poverty for its 16,000 employees, many of whom have already gone months without pay.
The withholding of the Jet Airways salaries of pilots, suppliers and lessors was deemed necessary by the company following its default on loans and accrued debt of around $1b.
The future is similarly bleak for other individuals reliant on the carrier for their livelihoods. In addition, thousands of ancillary businesses in Mumbai are likely to be affected by any closure.
In January of this year the airline’s withholding of the salaries of pilots, engineers and senior members of staff since August 2018 prompted cash-strapped Jet employees to hold numerous demonstrations.
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On March 30th, Reuters reported that Jet had secured enough money to pay pilots and engineers their December salaries. However, the company made no promises to pay the many hundreds of other employees out of pocket.
In April’s press release, the airline said that it hoped to ‘bring the flying sun back into the skies’. But, it made no mention of being able to pay the Jet Airways salaries due to its staff.
Consortium of employees
On April 29th, The Economic Times reported a development in the saga. In an unusual move, an initiative could see a consortium of Jet Airways’ employees bidding for control of the airline.
The employees made their intention known in a letter sent to the SBI’s chairman Rajnish Kumar.
The letter is thought to outline a feasible plan of action that involves a bid of Rs 4,000 crore ($577m) from the employee consortium. This would be used in combination with Rs 3,000 crore ($433m) from outside investors.
Meanwhile the airline continues to work with its lenders, led by the SBI, to identify investors. But will anyone be willing to put forward enough money to steer Jet Airways back on course?
India’s Ministry of Civil Aviation acknowledged the difficulties faced by Jet and supported the carrier’s efforts to secure a bank-led resolution.
MoCA also hinted at the fact that a cut-off date was drawing near. ‘The bank-led resolution process is expected to end by May 10,’ a spokesperson wrote in a Tweet.
Watch this space
Two weeks ago the SBI accepted expressions of interest in the airline and, according to LiveMint, drew up a shortlist of investors to place binding bids for Jet.
The shortlist includes Etihad Airways PJSC, India’s National Investment and Infrastructure Fund (NIIF), TPG Capital and Indigo Partners. Etihad Airways already owns a minority stake in Jet.
Despite the interest of these companies and the efforts of the SBI to bring to a close an unpleasant chapter in the airline’s otherwise illustrious history, it is still not clear whether a buyer will emerge in time to save Jet Airways from going under.