Mounting Debt Forces Hard Landing For India's Jet Airways

Enlarge this image toggle caption Punit Paranjpe/AFP/Getty Images Punit Paranjpe/AFP/Getty Images

India's oldest private airline, Jet Airways, was one of the first carriers to emerge as the country's economy opened up in the early 1990s. At one time, it boasted more commercial aircraft than any other airline on the subcontinent.

But earlier this week, that once-dazzling fleet of 120 planes was down to just seven. And before dawn Thursday, after months of wooing investors for cash that just didn't come, Jet Airways landed its last plane on the tarmac at its home base in Mumbai — at least for now.

Creditors say they're "reasonably hopeful" that a bidding process with potential investors would be able to save the company. Otherwise, if it declares insolvency under India's new 2016 bankruptcy law, Jet Airways' creditors may seek to dismantle the company and recover their debts within 180 days.

On Twitter, passengers expressed sorrow and praise — rare for any airline in an era when most social media mentions are of delays and hassles.

"Was very proud to see how an Indian airline had become world class," one man wrote. "And their ground staff, especially in Mumbai, was second to none."

On the Bombay Stock Exchange, shares in Jet Airways dropped Thursday by nearly a third. The company is worth about $260 million, compared with a high of $1.6 billion in 2005. But it's believed to have more than $1 billion in bank debt.

Some 20,000 jobs are at stake. Many pilots and crew members have not been paid for weeks or months. Employees demonstrated Thursday in New Delhi and Mumbai, calling on the government to bail out their embattled employer. Some were in tears. One placard read: "Save Jet Airways, Save our family."

For months, the government had been lobbying state banks to do the same. But late Wednesday, the State Bank of India, on behalf of a consortium of lenders, told Jet Airways it would not lend enough money — at least not immediately — to keep the carrier afloat.

It literally came down to putting fuel in the tanks.

"It would therefore not have been possible for us to pay for fuel or other critical services to keep the operations going," CEO Vinay Dube said in a statement posted on the airline's website. He says the decision to suspend all domestic and international operations was made with "deep sadness and with a heavy heart."

Ironically, India's national carrier, Air India — which its competitor Jet Airways sought to cast as a drab, inefficient, state-run behemoth — survives, but just barely. Air India is also cash-strapped and got a partial government bailout last year. Government plans to privatize the airline have been stalled for months.

Both Jet and Air India have been hit hardest by competition from an array of relatively new low-cost short-haul carriers, such as IndiGo, SpiceJet, Vistara, GoAir, that have flooded India – the world's fastest-growing aviation market. Last year, the country's aviation minister predicted India would soon host a billion flights a year, overtaking the U.S. as the biggest aviation market in the world.

The question of whether that market has room for Jet Airways, may be decided by its creditors in the coming weeks.