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.
 
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COMMENTS

jaideep suri

3 weeks ago

Aiyar ji"s comment is relevant Why has no one ever tried to find out the reason behind Praful Patel as Aviation Minister making Air India buying so many aircraft from Boeing and that too with sovereign guarantee.Air India did not need so many of Dreamliners and now the nation is going to repay the money.

shah j p

3 weeks ago

It will be a bad precedent. Why should govt with public money rescue private air line? PSBs do not help evemn MSMEs of common men and on the contrary it hasten to kill sick MSMEs to make a show that PSBs are trying to maximize recovery.

Suketu Shah

4 weeks ago

If Namo wishes to walk the talk himself,all proceeds from his movie releasing in 15 days shd be paid as charity to Jet .Same with Amit Shah's upcoming book,donate everything to Jet first and lead by example!

SuchindranathAiyerS

4 weeks ago

Jet? India and Airlines. It was only a matter of time before Praful Patel's profligate UPA Scam Public Sector behemoth destroys the whole Industry through its contribution to the National Deficit and inflation. Kingsfisher was just the beginning:

jaideep suri

4 weeks ago

The root cause of other companies like Etihaad and Tatas not agreeing to buy is the refusal of Mr Goyal to hand over the control to the buyers and move out.Come on Mr Goyal you are a failure so bow out gracefully and let some one else try and turnaround the company or else the poor employees will suffer.Modiji stay away from forcing banks to bail him out.Donot forget the Kingfisher case,private entity so let them sort it out.

Suketu Shah

4 weeks ago

tax payers money used for anything but country's citizens.yet another example.

AAR

4 weeks ago

I remember 4-5 years back, Jet Airways cut down its staff in its Bombay Office, Shiv Sena intervened and forced Jet to take them back. Now that Jet is struggling, Government has to intervene.

Juliet DeSouza

4 weeks ago

Please inform us whether the chairman and directors have taken a cut in their remuneration.

S SRINIVASA RAJAN

4 weeks ago

This is really bad. What is the need to bail out a private airline with taxpayers money. No different from
what the earlier government was doing.





Arpita Padiyar

4 weeks ago

again public money used.

jaideep suri

4 weeks ago

What is wrong with Government of India?First tax payers are paying to keep AIR INDIA Flying and now a private airlines.Come on Modi ji and Jaitley combo is this what you stand for.

Meenal Mamdani

4 weeks ago

So another promoter is being bailed out by the govt even when it has said that it wants to let the market work to weed out unfit firms.
This problem has arisen because Naresh Goyal is not willing to cede control to those who are willing to invest in the airline to keep it afloat.
The investors are within their rights to say who should lead the company if they are putting in their money to keep it running.
We see another instance of crony capitalism.
No difference between BJP and Congress, just different capitalists being bailed out.

REPLY

S Balakrishnan

In Reply to Meenal Mamdani 4 weeks ago

Congress and bjp have the same crony capitalist friends.

Mindtree 'united' to oppose L&T's hostile takeover bid
Leading IT services firm Mindtree on Tuesday said the company's stakeholders, including investors and employees, were all "united" in opposing diversified conglomerate Larsen and Toubro Ltd's (L&T) bid to take it over.
 
"Our investors and employees stand united against this hostile takeover attempt by L&T, which is unprecedented in the Indian IT industry," the company's Chief Executive Rostow Ravanan told the media at the company headquarters here. 
 
Stating that the takeover attempt did not have any "strategic advantage", Mindtree's top executives said it could "undo" all the progress made by the company so far. 
 
"You (L&T) are a company with a turnover of Rs 120,000 crore, you are 18 times the size of Mindtree. Why can't you build a great technology business with your resources and capability...," company's co-founder Krishna Kumar Natarajan said.
 
Co-founder Subroto Bagchi was also present.
 
L&T on Monday bought 20.4 per cent stake in Mindtree from Cafe Coffee Day founder V. G. Siddartha for about Rs 3,300 crore and said it would also buy additional stake in the company through an open offer. 
 
Mindtree's promoters, however, declined to disclose their plan of action to oppose L&T's takeover bid. 
 
"We will hold discussions with all the stakeholders. Our Independent Directors will set up a committee and evaluate the deal," Ravanan said. 
 
Asserting that the takeover would demolish shareholder value for both companies, the company said it will seek legal opinion for its options in opposing the takeover. 
 
"Mindtree Minds (employees) have signed up for a mission, not just a salary. Take their mission away and they will go. What will you (L&T) be left with?" Natarajan asked. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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Reliance Communication Pays Rs462 Crore to Ericsson; Mutually Terminates Asset Sale Agreement with RJio. What Next?
The Reliance Anil Dhirubhai Ambani (ADA) group company, Reliance Communication Ltd (RCom), on Monday, paid Rs462 crore to Ericsson India in accordance with Supreme Court orders. Details of the nature of funding and how it was routed are not known, except for Anil Ambani’s statement thanking his 'respected' older brother Mukesh Ambani. Separately, RCom and the Mukesh Ambani group have made it clear that they have mutually agreed to terminate sale of its specified assets, including spectrum to Reliance Jio Infocomm Ltd (RJio) of the senior Ambani. This ends any hope for the debt-ridden company to raise funding by selling its assets. It also means that the National Company Law Tribunal (NCLT) will now decide RCom’s future. 
 
The apex court had given a deadline of 19 March 2019 to RCom for paying Ericsson, failing which Anil Ambani would have had to serve a jail term of three months. 
 
In a regulatory filing RCom says, "The requisite payment of Rs550 crore and interest thereon to Ericsson has been completed in compliance of the judgment of the Supreme Court."
 
With Monday’s payment of Rs462 crore, the debt-laden telco ends its 18-month long battle with Ericsson which had claimed dues for its maintenance services, it added.
 
Quoting senior advocate Anil Kher, who has been representing Ericsson, a report from Economic Times says, "Ericsson has received the payment along with up to date interest and it will accordingly be withdrawing the petitions filed for insolvency."
 
In the RCom’s regulatory filing, Anil Ambani stated, "My sincere and heartfelt thanks to my respected elder brother Mukesh, and Nita, for standing by me during these trying times, and demonstrating the importance of staying true to our strong family values by extending this timely support. I and my family are grateful we have moved beyond the past, and are deeply grateful and touched with this gesture.”
 
Last month, the Supreme Court bench comprising Justices Rohinton F Nariman and Vineet Saran also asked Reliance ADA group to purge contempt by paying Rs453 crore with interest to Ericsson within four weeks. If not paid, three months' jail term will follow, the bench had said. 
 
The bench had directed the Court's registry to give Ericsson Rs118 crore that were earlier deposited by RCom. The apex court said the entire amount that RCom has to pay to Ericsson is Rs550 crore plus the interest that was generated.
 
Commenting on the deal, Andy Mukherjee from Bloomberg says in recovering $80 million (Rs550 crore) from tycoon Anil Ambani, Swedish company Ericsson’s lawyers played the nascent bankruptcy system expertly. He says, "For an unsecured creditor to walk away with a 48% recovery of its claim—while secured lenders wait patiently for RCom to sell its spectrum, redevelop its land assets and pay them something—shows that the Swedish firm played its cards well." 
 
"It also shows the secured creditors, led by State Bank of India (SBI), in a rather poor light. They have been deluding themselves since June 2017, when they agreed to an out-of-court restructuring, including a plan to convert part of their debt into equity at almost Rs25 a share. Luckily that plan went nowhere. RCom shares closed on Monday at Rs4. As secured lenders cringe at that thought, Ericsson’s lawyers can bask in their success. First, they snagged a sweet deal by exploiting RCom’s initial reluctance to enter in-court bankruptcy. Then, they succeeded in getting a credible jail risk for Anil Ambani thrown into the mix to ensure the deal was honoured. Finally, they got their client $80 million," Mr Mukherjee added. 
 
Separately, in a regulatory filing, RCom said by mutual agreement, it has decided to terminate sale of certain specified telecom assets to Reliance Jio. "The said transactions have become incapable of being consummated in accordance with the terms thereof, on account of various factors and developments since the execution of the said agreements nearly 15 months ago," the company said its filing.
 
RCom claims that over the past 15 months and after more than 45 meetings, it could not get consent from over 40 foreign and Indian lenders for its proposed transaction with RJio. "The statements of the lenders, as recorded in the order dated 15 March 2019 of the National Company Law Appellate Tribunal, (NCLAT) that it is not possible for them to sell the specified assets, and therefore, the NCLT process for debt resolution should be reinstated. RCom group is committed to a comprehensive resolution of their overall debt, with transparency, certainty and finality, through the NCLT process," it added.
 
NCLT’s order on 4 February 2019 had also restrained sale, transfer or alienation of any movable or immovable property of RCom, Reliance Telecom (RTL) and Reliance Telecom Infrastructure (RITL).
 
Last year in April, the NCLAT as well as the Supreme Court had allowed RCom to sell its tower and fibre assets. RCom’s plea challenging the High Court stay was supported by the consortium of banks headed by the SBI, which had contended that the sale of spectrum and optical fibre assets would fetch Rs25,000 crore—part of Rs45,000 crore that RCom owes them.
 
On 28 December 2017, RCom had signed an agreement with RJio, a subsidiary of Reliance Industries Ltd (RIL), for selling certain specific assets and for change in allotment of certain specific spectrum. 
 
RCom failed to get consent from lenders and also necessary approval from department of telecom (DoT) for passing on its spectrum to RJio through mutual agreement. 
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