Jet Airways: Govt Reportedly Asks PSBs To Save the Carrier from Bankruptcy; Passengers in a Panic as More Flights Cancelled; Pilots Threaten Stir
The Indian government has reportedly asked public sector banks (PSBs) to save private carrier Jet Airways from bankruptcy ahead of elections, says an international wire agency.
After grounding a large part of its fleet (78 out of 119), the carrier has been cancelling flights on a massive scale leaving thousands of domestic and international travellers in the lurch.
After a huge outcry on social media, Union Aviation Minister Suresh Prabhu tweeted this evening that he had directed the aviation secretary to “hold an emergency meeting on grounding of flights by Jet Airways, Advance bookings, Cancellation, Refunds and Safety issues, if any. Asked him to get a report on Jet compliance issues immediately from DGCA."
The Directorate General of Civil Aviation (DGCA), which called a meeting with the carrier, later said that, at present, Jet Airways has 41 leased aircrafts in its operational fleet which are expected to cater to 603 domestic and 382 international flights. The airline is operating with half its original fleet of 119 aircrafts and managing only 200 flights a day.
The development comes a day after passengers were left stranded at Abu Dhabi as Jet Airways cancelled flights. The cash-strapped carrier, which has been forced to ground over 40 aircraft of its fleet due to non-payment of amounts outstanding to lessors, is regularly grounding aircraft as it is unable to pay the lessors. But more about it later.
Operating with a depleted fleet due to the grounding of all but 41 aircraft by Jet Airways, airfares are likely to soar and alternative arrangements are not possible. This is a double whammy for people, because almost all vacationers would have booked and paid for hotel accommodation in advance too.
Social media remains abuzz with desperate pleas from international travellers, who find that they cannot make their connecting flights from international hubs, since the first leg of their flights out of India had been abruptly cancelled.
Ironically, many of those tweeting desperately and tagging the airline seem clueless about its dire financials and crumbling operations — most are making demands for refunds and rescheduling, which harried Jet employees, who themselves have not been paid for a long time, are unable to answer.
Meanwhile pilots of Jet Airways are holding meetings in Mumbai and New Delhi to chart out their future course of action regarding non-payment of salaries for over three months.
As per reports, if there is no proper clarity on the resolution process and salaries are not paid by 31st March, then pilots of Jet Airways would stop flying from 1 April 2019.
PSB to the Rescue?
Quoting two sources from the administration, a report from Reuters
says, "...(the) government has asked state-run banks to rescue privately held Jet Airways without pushing it into bankruptcy, as Prime Minister Narendra Modi seeks to avert thousands of job losses weeks before a general election."
As per the report, the ministry of finance has been asking details on financial health of Jet Airways from banks led by State Bank of India (SBI) on a weekly basis. "The government has urged state-run banks to convert debt into equity and take a stake in Jet Airways in a rare move in India to use taxpayer money to save a struggling private-sector company from bankruptcy," the report says.
The government has also nudged its 49%-owned National Investment and Infrastructure Fund (NIIF)—created to invest in stalled and new infrastructure projects—to buy a stake in Jet, Reuters says quoting a separate government source.
This puts into question the efficacy of the national democratic alliance (NDA) government’s much touted success with the Insolvency and Bankruptcy Act (IBA), and underlines the fact that a bankruptcy law is not substitute for good governance and tough and timely action by lenders.
Jet Airways chairman Naresh Goyal had asked Etihad, which has 24% stake in the airline, to bring in Rs750 crore demanded by lenders as promoter contribution. Etihad, however, expressed that it was willing to sell its 24% stake if it got a price of Rs150, which is much lower than the current price of Rs236. Lenders are willing to provide support but unwilling to hold more than 49% equity through debt conversion.
Last month, terming media reports as 'speculative', SBI had said no decision has been taken on moving the National Company Law Tribunal (NCLT) to recover loans from the private carrier.
At an extraordinary general meeting (EGM) in February 2019, shareholders of Jet Airways had approved, by an overwhelming majority, a proposal to convert a part of the company's loans into shares.
This was a significant development as the approval was required to go ahead with the bank-led provisional resolution plan (BLPRP) led by the consortium of the lenders. As part of the plan, public sector lenders would become the largest equity owners of the airline, virtually making it a nationalised carrier.
Etihad, however, abstained from voting on various proposals during the EGM.
"The BLPRP currently estimates a funding gap of Rs8,500 crore, including proposed repayment of aircraft debt of Rs1,700 crore, to be met by appropriate mix of equity infusion, debt restructuring, sale or sale and leaseback or refinancing of aircraft, among other things," Jet Airways had said in a regulatory filing.
Both SBI and PNB were said to have agreed to provide Jet Airways with Rs500 crore interim funding to continue operations until a long-term restructuring plan is worked out for its Rs8,000-crore debt.
Flyers Taking a Big Hit
Late in the night on Monday, passengers travelling in the first two weeks of April received messages that their flights were cancelled. Naturally, the cash-strapped airline is not talking about refunds. This will throw into jeopardy the plans of all those who had booked their summer vacation travel months in advance.
The government, which collects a chunk of the airfare as taxes has been watching silently—on social media, until the Mr Prabhu, finally directed the aviation secretary to call a meeting on Tuesday evening.
Debt-ridden Jet Airways has been suo moto cancelling tickets of its passengers, many of whom are struggling to even get refunds from the carrier.
In addition, several fliers are seeking refund from Jet Airways and are venting their anger over social media.
Earlier, Jet Aircraft Maintenance Engineers’ Welfare Association wrote to the DGCA raising issues of overdue salaries.
Last month, amidst cancellations of flight on technical issues, Jet Airways had revised its refund rules.
Under the new regime, the penalty for a cancellation ranges between Rs2,300 and Rs4,600 depending on the cost of the ticket, and if the cancellation or change is done seven days before or after departure.
The fee for a change of ticket will range between Rs1,500 and Rs4,300. The cancellation fee charged by low-cost carriers like IndiGo and Spice Jet is a flat Rs3,000, which is much lower than that Jet Airways.
Pilots To Meet To Decide Future Course of Action
The National Aviators Guild will hold meetings in Mumbai on Tuesday and in Delhi on Wednesday to discuss ways in which to deal with the present situation.
The meetings come a day after Jet Airways founder and chairman Naresh Goyal appealed to employees to remain patient and give the resolution process some time to complete. "I am fully aware of the hardships each of you are undergoing owing to the stretched-out ongoing dialogue and deeply, most sincerely appreciate your patience, perseverance and your incredible dedication and loyalty," he said in an email to employees on Monday.