Jet Airways suspends all operations as lenders reject plea for funds

Jet Airways, started more than 25 years ago by Naresh Goyal, has suspended operations after lenders turned down the airline’s demand for emergency funding. Lenders’ consortium, led by State Bank of India, indicated the effort to select a new investor would continue even as Jet was “temporarily” grounded on Wednesday.

Bid documents to select new investors were issued on Wednesday and the lenders propose to conclude the process by May 10. Four parties including private equity firms TPG Capital and Indigo Partners, besides sovereign fund NIIF and Jet's strategic partner Etihad Airways, are in the fray to acquire ownership of the troubled airline.

The grounding comes after weeks of painstaking negotiations between the airline and its lenders for funds following a severe cash crunch that had led to defaults and mounting dues. The airline was initially committed an interim funding of Rs 1,500 crore in March, as part of a bank-led resolution plan which was to see the transfer of ownership and management to banks. While Goyal and his wife Anita stepped down from the board and pledged their shares, the issue of shares to banks and release of interim funds failed to materialise because of lack of consensus among banks about what some believed was throwing good money after bad.

Jet Airways Chief Executive Officer Vinay Dube had sent an SOS to SBI on Tuesday, seeking immediate funding, warning the lenders that the airline would have to be shut down if money was not made available. As the lenders turned down the request, the airline decided to ground all operations.

“Late last night, we were informed by SBI, on behalf of the consortium of Indian lenders, that they are unable to consider our request for interim funding of Rs 983 crore. Because no emergency funding from the lenders or any other source of funding is forthcoming, it will not be possible for the company to pay for fuel or other critical services to keep operations going. Consequently, with immediate effect we are compelled to cancel all international flights as well as our domestic flights,” Dube wrote in a staff email.

Jet Airways, which till a few months ago operated nearly 600 daily flights, managed a mere 17 services on Wednesday with five planes — its last one was an Amritsar-Mumbai flight. Ironically, the last flight was operated with an aircraft of JetLite — the airline's subsidiary set up on acquisition of Air Sahara in 2007. The expensive Air Sahara buy is often cited as a reason for Jet’s downfall.

“A decision like this is never easy to make, but without the interim funding, which we have been repeatedly requesting for, we are simply unable to conduct flight operations in a manner that delivers to the very reasonable expectations of our guests, employees, partners and service providers. Over the last several weeks and months, we have tried every means possible to seek funding, both interim funding as well as long-term funding, to keep our operations going, but we were not successful," Dube said.

Jet said essential services needed to support guest services and the re-commencement of the flight operations would be kept onboard until further notice. The airline said it would now await finalisation of the bid process by SBI and other lenders. 

In his email, Dube said there were unanswered questions like the status of airline's 15,000 employees during sales process. "We must also be realistic that the sales process will take some time and will throw up several more challenges for us, many of which we don’t have the answers to, today. For example, we don’t have an answer today to the very important question of “what happens to us employees during the sale process”. Your leadership team is working on answering such questions alongside the lenders," he said. In a statement, Etihad Airways said the airline continues to re-accommodate and support affected guests. "Our teams are assisting guests with their travel arrangements and rebooking those affected onto the next available flights. We continue to work with Jet management, lenders and key stakeholders in the context of the lender-managed effort to restructure the company.”