india

Updated: Apr 17, 2019 07:31 IST

Delhi The future of cash-strapped Jet Airways (India) Ltd hung in balance on Tuesday, with the management saying late in the evening that it was awaiting “emergency liquidity support” of Rs 400 crore from a consortium of banks led by the State Bank of India, failing which it would have to temporarily suspend its already thinned operations.

Earlier in the day, civil aviation minister Suresh Prabhu called for a review of issues related to struggling Jet Airways, including rising fares on other airlines and flight cancellations.

“Directed Secretary @MoCA_GoI to review issues related to Jet Airways, especially increasing fares, flight cancellations etc,” Prabhu said in a tweet. After a review, the aviation regulator asked airlines to reduce prices on 10 routes.

However, there were conflicting reports on whether these funds would be forthcoming. Bloomberg News reported, citing people familiar with the matter, that bankers have refused to pump in any more money into the airline.

Banks are keen and willing to help Jet Airways, provided promoters show firm commitment in infusing funds with a clear-cut roadmap, two bankers with direct knowledge of the matter said on condition of anonymity. The promoters include Etihad, which has a 24% stake in the airline.

The bankers added that they would like the government to intervene.

“In fact, the government should step in to resolve the matter in a resolute manner. Instead of holding separate meetings with bankers and promoters, the government should bring all the stakeholders on the table and secure commitments from promoters. It is not difficult, as [Jet Airways founder] Naresh Goyal is already out,” one of the bankers said.

“Lenders are committed to Jet Airways’ revival. SBI and SBI Capital are working on a package but it has not been finalised” Punjab National Bank (PNB) managing director Sunil Mehta said.

Promoter Naresh Goyal has already stepped down from the board of the airline and on Tuesday pulled out of bidding, deciding not to try to retake control of the airline that he ran until last month. The development came after some of the prospective investors objected to his entry.

HT learns that bidders Etihad and TPG Capital are among those that protested Goyal’s attempt to bid for the airline.

The first banker claimed that Etihad may be playing hardball by refusing to infuse any money so as to reduce the asking price. Etihad didn’t respond to an e-mail seeking comment sent late on Tuesday evening.

Banks, which have taken control of Jet, have offered to sell between 32.1% and 75% in the airline, as they seek to recover the money the airline owes them, around Rs 8,400 crore. SBI Capital Markets is handling the sale.

The airline has sought an interim emergency funding of Rs 400 crore from lenders, civil aviation secretary Pradeep Singh Kharola confirmed on Tuesday evening, although he did not indicate whether the government would step in to bail the airline out should the lenders not come around. A finance ministry official, who asked not to be named, said the banks could eventually provide emergency funding to the airline.

The board of directors of the airline met in Mumbai on Tuesday, where the management led by chief executive Vinay Dube suggested suspending domestic operations amid a cash crunch, said a person familiar with the matter who spoke on condition of anonymity.

On Tuesday, Jet Airways operated about 40 domestic flights. The airline has already suspended all international operations till April 18. Kharola said the airline was operating only five aircraft on Tuesday.

A Jet Airways spokesperson didn’t respond to an e-mail seeking comment.

“The company’s leadership, in consultation with its board of directors, is engaged with lenders in connection with the said emergency funding request,” the airline said to the stock exchanges in a filing.

Meanwhile, the US Exim Bank, which extended loans to the tune of ~2,000 crore to Jet Airways for purchase of Boeing 777 aircraft, has recalled all loans extended to the airline due to default. It is likely to take the possession of these aircraft using the funds.

Queries sent to the US Exim Bank didn’t yield any response till the time this report went to press.

Jet Airways has deferred interest payments to banks and dues to fuel suppliers, oil marketing companies (OMCs) and aircraft lessors. As a result, the lessors of the airline have grounded a large chunk of its 119 aircraft.

Jet Airways has also held back salaries since January to a section of its staff, including pilots, engineers and general managers. In addition, it has deferred March salaries to all its employees, as it continues to battle financial woes.

“Our sense is that the airline’s board of directors will continue its operations using a skeletal staff. As it is only seven aircraft [of the airline] is [currently] flying,” said a Jet Airways official, who’s not a member of the airline’s board of directors.

“In the last few months, about 250 pilots have left the airline, while 23 pilots resigned on Tuesday. At present, the total number of pilots in the airline stands at about 1,300,” the person added, asking not to be identified.

On Tuesday, shares of Jet Airways fell 7.62% to Rs 241.85 apiece on BSE, while the benchmark Sensex rose 0.95% to end the day at 39,275.64 points.

The airline needs around Rs 1,500 crore to tide over its immediate issues, the two bankers said, adding that they are open to committing funds, provided the promoters do their bit. “Banks can infuse funds only after a viable revival package is offered by promoters. Although we are sympathetic to Jet employees and consumers, we cannot take decisions under public pressure and later, we will [be] held guilty of taking a decision that would be detrimental to the interest of banks,” the second banker said.

Aviation regulator DGCA on Tuesday asked airlines to reduce fares on 10 domestic routes to “reasonable levels” as ticket prices on these high density routes have risen up to 30% in the past month, a senior DGCA official said on condition of anonymity.

(Agencies contributed to this story)