Jet Airways crisis deepens: Fleet down to five, airline asks for Rs 400 crore emergency funding

Jet Airways crisis deepens: Fleet down to five, airline asks for Rs 400 crore emergency funding

According to airline sources, while the company has sought Rs 1,000 crore, they are hopeful that banks will extend Rs 400 crore immediately to keep the airline flying.

Jet Airways aircraft at the Chhatrapati Shivaji Maharaj International Airport in Mumbai on Tuesday. (Pradip Das)

India’s oldest private airline Jet Airways, which is operating on a skeletal schedule with just five aircraft due to its critical liquidity position, Tuesday said it is talking to its lenders for emergency funding to “arrest further deterioration of its services”.

Civil Aviation Secretary Pradeep Singh Kharola, who reviewed the situation, said the airline has sought immediate fund infusion from banks to stay afloat.

In a mail sent to Jet’s employees late Tuesday, the airline’s chief executive officer Vinay Dube said the airline reached out to State Bank of India “yet again and stressed on the need for urgent funding requirements, critical to the continuation of the operations”. “In the said communication, we have highlighted the specific areas that will be immediately impacted, should the funding not be forthcoming,” wrote Dube.


Bank funds may help for now

A delay in banks releasing emergency funds to Jet Airways for daily operations has worsened the situation. While the promised Rs 1,500 crore was a small amount for the airline, which has debt and payables exceeding Rs 10,000 crore, it could have provided the impetus required to survive until a new investor is brought on board.

According to airline sources, while the company has sought Rs 1,000 crore, they are hopeful that banks will extend Rs 400 crore immediately to keep the airline flying. Lenders, however, are divided on giving more funds to the airline, said a banking source. “While four banks have agreed to extend funds, four have opposed the proposal,” said an official.


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“Please note that in view of the critical liquidity position of the company, its operations have been severely impacted. Meanwhile, the company is awaiting emergency liquidity support from the consortium of domestic lenders led by State Bank of India. The company’s leadership, in consultation with its Board of Directors, is engaged with lenders in connection with the said emergency funding request to arrest a further deterioration of its services and minimise inconvenience to its guests,” Jet Airways said in a filing with the BSE. The exchange had sought clarification on reports suggesting Jet will suspend its operations temporarily.

The airline has already suspended all its international operations until April 18.

Some banks expressed the opinion that they were throwing good money after bad money as the revival of the airline, which has no tangible assets, has become more difficult. Besides, there is an opinion that Rs 1,500 crore may not be enough to keep the airline running until a new promoter/investor is selected. Officials of banks had met Monday but deferred any decision on pumping money into the airline.

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Punjab National Bank (PNB) Managing Director Sunil Mehta said, “Discussions for reviving the airline are underway and nothing has been finalised as of now. SBI Capital Markets is working on the revival package for Jet Airways.”

Representatives of banks also spoke to senior Finance Ministry officials on bailing out the airline. An official of the Jet Airways Pilots’ Union said they have asked for emergency funding of Rs 1,500 crore from the government. The salary dues of pilots and crew should be accounted for when the funding is extended by the banks, “Otherwise, we will move the National Company Law Tribunal,” he said.

Meanwhile, shares of Jet Airways fell by nearly 8 per cent amid reports that the company is likely to temporarily shut down its operations. The scrip plummeted 18.56 per cent during intra-day trading when reports came in that the airline will shut down operations by Wednesday if fresh funding is not made available by banks.

However, the scrip made a partial recovery and closed 7.62 per cent lower at Rs 241.85 on the BSE amid speculation that there could be the possibility of last minute funding by banks. The company’s market valuation also fell by Rs 225.65 crore to Rs 2,747.35 crore on the BSE.

On March 25, as part of the bailout plan worked out by the lenders, Naresh Goyal and his wife Anita Goyal stepped down from the board. The airline was supposed to create appropriate security over the company’s assets for securing the existing facilities extended by the lenders and the proposed immediate funding support of up to Rs 1,500 crore by way of an appropriate debt instrument. Banks are unlikely to chip in funds with more funds unless adequate security cover is provided by the airline. “Unfortunately, the sale of process of stake held by banks is taking time… there’s no chance of a new investor or promoter coming in the near future,” said an institutional source.

Bankers had earlier said the interim financing of Rs 1,500 crore would have been adequate for a two-month period. However, banks which have an exposure of over Rs 8,000 crore in the crippled airline was delayed releasing Rs 1,500 crore as promised in the resolution plan. State Bank of India has said the bid process for “orderly sale” of equity in the airline is currently being run by SBI Caps and is being vetted by the legal team.

“The prospective bidders will be shortlisted by SBI Caps shortly,” an SBI spokesperson said. “The proposed equity conversion by banks, if any, will be undertaken as a transitory mechanism to facilitate the bidding cum sale process. SBI is acting on behalf of the group of lenders as part of the Bank Led Resolution Process,” he said.


“Please be assured that we continue to work proactively with the Indian lenders to provide all the support which may be required, to help us resurrect Jet Airways, including working closely with the potential parties that are keen on bidding for the airline,” Dube wrote to Jet’s staff.