In A close replication of events that unfolded before Kingfisher Airlines was grounded in 2012, India’s largest oil marketing company Indian Oil Corp temporarily halted supply of aviation turbine fuel to cash-strapped Jet Airways across the nation two days in a row.
According to sources, the oil company stopped supply to Jet Airways at noon on Friday resulting in operational disruption for the airline, which is already flying a curtailed schedule. The supply was resumed later in the day around 5 pm.
On Thursday, too, fuel supply to Jet was halted for a few hours during the day.
The development came in light of Jet Airways’ inability to purchase fuel on credit given its financial woes. Low-cost carrier SpiceJet, too, faced fuel supply cuts in 2014 when it was on the verge of a shutdown but later received funding from its founder Ajay Singh.
Further disruptions likely
Stoppage of fuel supply is likely to cause further disruption to the airline’s operations and as a result its stake sale process. Given that Jet Airways has already vacated a number of prime slots in congested airports such as Mumbai, the airline’s value could erode further if it is unable to maintain its skeletal network. It is imperative for the bankers to infuse the proposed Rs 1,500 crore to ensure that the airline can make payments to fuel companies, lessors and employees.
Jet’s lenders, led by State Bank of India, which have taken control of 50.1 per cent stake in the airline, had said on March 25 they would infuse Rs 1,500 crore in the airline as an emergency measure but banking sources have said that the amount has not yet been pumped in to the airline. SBI is the lead lender to Jet Airways, which has a debt burden of more than Rs 8,000 crore.
Besides, the carrier’s founder Naresh Goyal and wife Anita Goyal quit the board. The shareholding of Goyals have come down to 25 per cent from 51 per cent earlier. On Wednesday, Naresh Goyal, the former chairman of the airline, said he had agreed to every term and condition laid down by lenders to ensure timely release of funds for the airline.
The lenders said on Thursday, after a three-hour long meeting with the Jet Airways’ management, that they will be proceeding with the next step of the airline’s resolution plan inviting bids from potential buyers of their stake in Jet starting Saturday. The once-second largest airline has drastically curtailed its operations since last month following severe cash crunch and is operating only 26 planes of its 119 aircraft fleet.
However, the airline has informed the government that it would reinstate more aircraft to have a fleet of 75 planes by the end of April. On account of the curtailed schedule, Jet Airways has vacated key slots that have been lapped up by rival airlines.
Ahead of commencement of bidding for the lenders’ stake in Jet, the airline’s share fell by 1.50 per cent on the BSE to end Friday’s trading at Rs 256.05.
The consortium of lenders said that other options would be explored in case the stake sale efforts do not result in an “acceptable outcome”. The consortium of domestic lenders had also said they would pursue resolution plan for the carrier in a time-bound manner under the present legal and regulatory framework. Acute financial crunch has forced the airline to ground aircraft, cancel flights and delay payment of salaries, including to pilots.