Mumbai/New Delhi: Jet Airways (India) Ltd teetered on the brink of collapse as lenders to the cash-strapped airline, once the country’s largest outside government control, weighed interim funding to keep at least some of its planes operational.
A section of the Jet Airways management was in favour of a temporary shutdown until emergency funds are made available, two people aware of the development said, requesting anonymity.
A meeting between the airline’s management and lenders went on till late Tuesday evening but the impasse continued.
Jet Airways has sought an emergency funding of ₹400 crore from lenders, civil aviation secretary Pradeep Singh Kharola told reporters on Tuesday evening. He said the airline had only five aircraft in operation on Tuesday.
The interim funding was supposed to help Jet Airways keep at least some of its planes flying till the lenders find a buyer.
On Monday, lenders had shortlisted Etihad Airways PJSC, India’s National Investment and Infrastructure Fund (NIIF) and private equity firms TPG Capital and Indigo Partners to place binding bids for the ailing airline.
Finding a buyer will be critical for the airline’s survival.
Jet Airways’ board met in Mumbai on Tuesday, where the management led by chief executive Vinay Dube suggested the airline suspend domestic operations among other options, said the first of the two people cited above.
The second person said the management of the airline will continue to seek funding from lenders. “Fresh fund infusion is essential to keep the airline operational," the person said.
Queries emailed to a Jet Airways spokesperson for comment remained unanswered.
State Bank of India, the lead lender to Jet Airways, did not respond to Mint’s query about the options before the lenders.
In a statement on late evening Tuesday, Jet Airways said: “The company is waiting for emergency liquidity support from the consortium of domestic lenders led by the State Bank of India. The company’s leadership, in consultation with the board of directors, is engaged with the lenders in connection with the said emergency funding request to arrest a further deterioration of its services and minimize inconvenience to its guests."
Meanwhile, the US Exim Bank, which had extended loans to the tune of ₹2,000 crore to Jet Airways for purchase of Boeing 777 aircraft, has recalled all loans to the airline due to default. It is likely to take possession of aircraft that were purchased by the airline using the funds.
Queries sent to the US Exim Bank didn’t yield any response till press time.
However, a senior finance ministry official on Tuesday said that the lenders are likely to disburse funds to Jet Airways. The official didn’t want to be named.
Jet Airways may have to shut operations, at least temporarily, if it fails to raise money in the days ahead. The airline has suspended international operations till 18 April.
Jet Airways has deferred interest payments to banks, and dues to fuel suppliers, oil marketing companies and aircraft lessors. As a result, lessors of the airline have grounded most of its 119 aircraft.
It has also held back salaries since January to a section of its staff, including pilots, engineers and general managers. In addition, the carrier 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 skeletal staff," said a Jet Airways official, who is not a member of the airline’s board.
“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 said requesting anonymity.
On Tuesday, Jet Airways shares fell 7.62% to ₹241.85 apiece on the BSE, while the benchmark Sensex gained 0.95% to end the day at 39,275.64 points.
Shreya Nandi in New Delhi contributed to this story.