The Jet Airways Crisis Sheds A Stark Light On India’s Aviation Market

Often, India’s nationalised banks have opted for haircuts to help out cash-strapped companies in debt restructuring and benefitting their promoters.

Hundreds of Jet Airways employees protesting at Delhi’s Jantar Mantar and on the premises of metropolitan airports paints a worrying picture of the country’s fast-growing aviation market. Failing to meet its debt obligation of over Rs 1,500 crore and receiving no support from its lenders or other sources, Jet Airways announced the shutdown of its operations on 17 April.

Jet Airways informed the Bombay Stock Exchange (BSE) that “it was compelled to cancel all its international and domestic flights, as it couldn’t receive any fund infusion from its lenders or any other source.”

The complete shutdown of India’s oldest private airline has cast shadows on the growth story of India’s fast growing markets considering the complexities within the corporate system.

Following suspension of operations, Jet Airways shares had plummeted by 32.23 per cent by the evening of 19 April, Friday, to close at Rs 165.9 on the BSE. With the latest stock performance, Jet’s shares have crashed 85 per cent from its initial share sale price of Rs 1,100.

The State Bank of India (SBI) along with a consortium of 26 lenders of Jet Airways has invited bidding for 51-75 per cent stake in the bankrupt company.

“The best way forward for the survival of Jet Airways is to get the binding bids from potential investors,” stated the group of lenders on 18 April.

The total debt burden of the carrier was over Rs 8,500 crore, while its debt obligation at the end of March was over Rs 1,500 crore. There are more than 23,000 employees working with Jet Airways.

If the bidding process does not work out, then lenders will have to approach the National Company Law Tribunal (NCLT) for a resolution process.

Meanwhile, in a communication to the Ministry of Civil Aviation, the lenders have sought protection of prime airport slots of Jet Airways so that the value of the suspended airline does not erode further. Jet Airways 185 pairs of slots at Mumbai and Delhi airports are its primary resources.

Also read: Jet Airways Issues Gag Order to Employees

Bearing the brunt of delays in payment of salaries and the prospect of joblessness, hundreds of airline employees began protests at the Jantar Mantar in Delhi appealing the government to intervene for revival of the company. Following this, the Jet Airways management instructed its employees to not speak with external stakeholders, especially the media, saying it might impact the bidding

process of the airline’s stake sale, reported the IANS on 19 April.

This is not the first time that Jet Airways required fund infusion to serve debt deadlines. In April 2013, the company received a support of over Rs 3,600 crore from the UAE-based Etihad group selling 24 per cent stake.

As per reports, Abu Dhabi-based Etihad Airways, TPG Capital, Indigo Partners, and India’s government-owned sovereign fund National Investment and Infrastructure Fund (NIIF) have been shortlisted for the bidding.