Soaring fuel prices, loss of pricing power and fractious bailout talks have severely affected operations.

The story so far: Over the past few weeks, two-thirds of Jet Airways’ fleet has been grounded as talks over a bailout continue among Jet, its lenders and Etihad, which owns a 24% stake in the airline. Jet Airways has cancelled flights and suspended operations to several destinations, including Abu Dhabi.

How did Jet’s fortunes nosedive?

Jet Airways is an example of what soaring fuel prices and loss of pricing power due to relentless competition in the market can do to an airline company. Aviation turbine fuel accounts for more than half of the costs of an airline company, and the company has no control over it. As a full-service carrier, Jet also has a higher cost structure than low-cost carriers such as IndiGo or SpiceJet. In the ten years to 2017-18, Jet has reported a net profit only thrice, for the years ended March 2017, 2016 and a small profit in 2011, according to BSE data. With a negative net worth of over ₹7,242 crore and cash flows under strain, the airline could not repay its dues to banks and aircraft lessors on time. While the banks — Jet owes them ₹8,414 crore — have exhibited patience and tried to work with the company to help it take off again, the lessors have lost patience and repossessed their aircraft. Now, just about a third of Jet’s fleet is in the air, with the rest either grounded or repossessed by lessors.

What is Etihad’s role?

Jet roped in Etihad in April 2013 with a $379 million investment, a move that was expected to help lower debt while bringing in operational efficiency.

The airline has again sought the help of Etihad, but the latter, plagued by its own losses, has refused to play ball. The Gulf-based carrier hasn’t cleared the restructuring scheme designed by a lender consortium as it would have meant a reduction in its equity stake in the company. Etihad also wants Jet promoter and chairman Naresh Goyal to play a less important role, going by its insistence on capping his stake in the airline at 24%. Mr. Goyal is obviously not pleased. The banks, whose money is at stake, seem to be caught between the two.

Is Jet the only carrier to suffer?

No, the entire airline industry is in trouble of one kind or another that can be directly traced to high costs. Fresh trouble arose when the new Airbus A320neo planes of IndiGo reported problems with the Pratt & Whitney engine that could lead to stalling of the aircraft or even a forced shutdown of the engine mid-air. IndiGo had to ground these planes until the engine manufacturer fixed the problem. The recent crashes of the Boeing 737 MAX 8 plane, flown by Indonesia’s Lion Air and Ethiopian Airways, have caused problems for SpiceJet and Jet Airways which fly these aircraft in India. While Jet’s planes were already grounded, SpiceJet was forced to ground 15 of its Max 8 planes last week. IndiGo has already curtailed its schedule until the end of this month owing to pilot shortage. IndiGo, which reported profits for the three years ended March 2018, recorded a loss in the quarter ended September 2018.

Where is Jet placed now?

Etihad is said to have had enough and wants lenders to take over its 24% stake in Jet, which is also behind on salary payments. Mr. Goyal has written twice recently to the staff members, seeking more time. Jet’s lenders, led by the State Bank of India, are said to have asked Mr. Goyal to step down. Mr. Goyal wrote to Etihad’s board recently, saying that unless the latter infused at least ₹750 crore immediately, the situation at Jet could become “deleterious.” The restructuring plan worked out with banks last month seems to have collapsed. It is also clear that banks have not been successful in identifying a “strategic partner,” as envisaged in the plan.

What does the future hold?

With 16,000 jobs at stake and the general election coming up, the government is turning on the pressure on banks to find a quick solution. What that solution could be is unclear. Using taxpayer money to bail out Jet is not an option as it will be difficult for the ruling party to defend. But patience is running out for Jet’s stakeholders. Lessors of the repossessed aircraft could soon lease them out to its competitors; SpiceJet is said to be interested in 40 of Jet’s grounded aircraft. Pilots, who have threatened to stop work if dues are not paid by April 1, are queuing up for jobs with competing airlines. Lenders are said to be sounding out the Tatas again for buying out the airline. The Tatas did show interest a few months ago, but backed out. Any new investor would like total control of Jet, which Mr. Goyal is unwilling to concede. The final option is for lenders to take the airline to the bankruptcy court. They don’t appear keen on this and would like to save the airline, given the jobs at stake and the disruption a collapse could cause in the industry. But for that, Mr. Goyal has to play ball.