Jet Airways is teetering on the brink of collapse as banks have postponed the proposal to provide emergency funding of Rs 1,500 crore to the airline. The lenders of the airline met its management on Monday to decide on the funding, and discussions assumed significance given the airline's inability to stay afloat due to lack of sufficient working capital. Civil Aviation Secretary Pradeep Singh Kharola, on Friday, had told reporters that Jet only had sufficient room to operate till Monday.
The timing of the fund infusion by bankers remains crucial for the airline as it struggles to meet its dues to its employees, vendors and lessors. While the company's staff has started jumping ship by taking lesser paying jobs at rival carriers, lessors have started repossessing their aircraft. Jet's competitors in the country are lapping up its vacated slots at key airports like Mumbai.
The board of the airline will meet on Tuesday to assess the current situation and the way forward in the wake of cancellation of flights and grounding of aircraft due to cash crunch. In an internal communication, Jet Airways chief executive Vinay Dube said the lenders could not decide on the emergency funding and that the board of the airline will meet on Tuesday to take a call on the future.
"As you are aware, we have been working with the lenders to secure interim funding for our operations. The interim funding has not been forthcoming thus far, and as a result we have extended cancellation of international operations until April 18," he noted.
"The current status of our engagement with the lenders and other related matters shall be placed before the board tomorrow morning, where the management will seek guidance from the board on the next steps forward. We will keep you updated on all critical developments," Dube said in the mail.
In a statement, State Bank of India, which is the lead banker in the consortium of lenders, said that the bid process for "orderly sale" of equity in the airline is currently being run by SBICAPs and was being vetted by the legal team. "The prospective bidders will be shortlisted by SBICAPs 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. "Necessary support to facilitate the process is being extended by the banks in the consortium. Cooperation by and support from all the other stakeholders will be the key to the success of the process," the spokesperson said.
The SBI statement, however, did not disclose details about the fund infusion promised by the bankers.
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 process of sale 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.
Meanwhile, news agency PTI reported that the airline's pilots union along with engineers and cabin crew members assembled at its headquarters to show their solidarity over salary delays.
The airline has just six-seven planes for operations, way below its peak of 123 planes in December. The airline's overseas operations are carried out by wide-body Boeing B777s and Airbus A330s while it deploys smaller B737s into the Middle East and Southeast Asia markets.
Aviation experts say it will be a big task for the airline to attain normalcy even if banks extend emergency funding.Significantly, even as the airline is facing a huge turbulence, its share price has remained steady over the last several weeks. On Monday, Jet shares closed 0.52 per cent higher at Rs 261.80 on the BSE.