Crash landing: Jet Airways lenders unwilling to commit fresh funds, airline headed for shutdown

By: and |
Updated: April 17, 2019 7:00:42 AM

Jet CEO Vinay Dube had indicated to the lenders — led by State Bank of India — it would be impossible to continue to operate the airline in the absence of some emergency funding of around Rs 400 crore. However, till the time of going to press, bankers had not sanctioned a new line of credit.

Jet Airways headed for total shutdown of ops, lenders unwilling to commit fresh funds (File photo)Jet Airways headed for total shutdown of ops, lenders unwilling to commit fresh funds (File photo)

Cash-strapped Jet Airways, on Tuesday, seemed to be headed towards a temporary shutdown of its operations with lenders unwilling to commit any fresh funds. The beleaguered carrier operated just five planes of its fleet of 119 aircraft on Tuesday, down from the seven it flew on April 15.

Jet CEO Vinay Dube had indicated to the lenders — led by State Bank of India — it would be impossible to continue to operate the airline in the absence of some emergency funding of around Rs 400 crore. However, till the time of going to press, bankers had not sanctioned a new line of credit.

Earlier in the day, Dube had been authorised by the Jet board to bring the operations to a halt if no funds were forthcoming.

In a late evening letter to employees, Dube said the company had reached out to SBI. “We have highlighted the specific areas that will be immediately impacted should the funding not be forthcoming. We have stressed on the need for urgent funding requirements, critical to the continuation of the operations of our airline,” Dube wrote.

The consortium of banks is understood to be reluctant to infuse more money until a prospective buyer for the airline is found. Four prospective buyers are believed to have been shortlisted in the preliminary round of bidding for the full-service carrier, which has over 22,000 employees.

Meanwhile, civil aviation secretary Pradeep Kharola said Jet had sought `400 crore from the lenders. The DGCA, he said, reviewed the hike in domestic airfares due to aircraft grounding by Jet.

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“We are expecting 10 more aircraft to be added by carriers during May to deal with peak demand. Some airlines are in talks with lessors to take Jet Airways’ de-registered planes,” Kharola told reporters. On Monday, Jet extended the cancellation of international operations till April 18 due to the cash crunch. Jet, which made losses of `3,208 crore in the nine months to December 2018, had a gross debt over `7,654 crore in December 2018.

Trouble at the airline began last August when it asked employees to take up to 25% salary cut to save costs.

Jet has not paid employees March salaries; pilots have not been paid since January while dues to other employees — aircraft maintenance engineers and senior management — also remain unpaid. The airline has not paid its vendors, lessors and also has dues to oil marketing companies.

Under the banks-led debt resolution plan approved by the Jet board on March 25, lenders will acquire an equity stake in the airline and infuse Rs 1,500-crore. The carrier’s founder and promoter Naresh Goyal and his wife Anita Goyal have stepped down from the board. Under the present shareholding pattern, 51% in Jet is owned by Goyal, 24% by Abu Dhabi-based equity partner Etihad Airways and the rest with public. The Jet stock closed at Rs 242 on the Bombay Stock Exchange on Tuesday, down 7.6% over Monday’s close.

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