Jet Airways shut down temporarily for want of funds

Mumbai: Jet Airways (India) Ltd flew its last flight on Wednesday night—9W 2502 from Amritsar to Mumbai—after lenders declined to hand out emergency funds, bringing the curtains down on an era in which it broke into a state monopoly sector to become India’s largest private airline at one point.

It’s unclear whether the airline will ever return to the skies, but if it does so, it will be under a new ownership structure.

“Late last night, Jet Airways was informed by the State Bank of India (SBI), on behalf of the consortium of Indian lenders, that they are unable to consider its request for critical interim funding,” Jet Airways said in a statement on Wednesday. “Since no emergency funding from the lenders or any other source is forthcoming, the airline will not be able to pay for fuel or other critical services to keep the operations going.”

The airline said it would await the bid finalization process by the lenders that is likely to bring in fresh equity by the end of May.

If the stake sale process to induct a new investor fails, it will mark the end of the airline that started operations on 5 May 1993, and then went on to become the first Indian airline outside government control to fly overseas destinations. The suspension of operations also marks the end of a year-long effort made by the airline and its lenders to save it from being grounded. The airline had already halted international flights. It operated about 40 flights using five aircraft on Tuesday and Wednesday.

“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,” CEO Vinay Dube said in an email to Jet Airways employees, adding that the company was working to ensure the bid process leads to a viable solution.

The developments on Wednesday are similar to the events that led to the grounding of Vijay Mallya’s Kingfisher Airlines about seven years ago.

Kingfisher Airlines was grounded temporarily when the aviation regulator suspended its flying licence, but the airline could never take to the skies again. Kingfisher Airlines shut down its operations on 20 October 2012.

“History and our business dynamics prove that once an airline shuts down in India, it never does restart,” said Mark D. Martin, founder and CEO of aviation consultancy Martin Consulting Llc. “We were given to understand by SBI in explicit terms that they’d do all that is possible with ensuring Jet Airways does not shut down; and to think that no money was pumped in to resolve liabilities such as lessor outstanding, fuellers and salaries is unforgiving.”

“With no aircraft, pilots, flight attendants and engineers, I certainly don’t see how any bidder will continue to see value in Jet Airways,” Martin added.

Two senior bankers told Mint that the lenders to the airline had rejected its request for emergency funds as they were unsure if the funds pumped into the airline at this stage could be recovered later.

“All along, we have neither declined nor accepted Jet Airways’ request for interim funding,” one of the two bankers said on condition of anonymity.

“We have always wanted some assurance that this money that we give will not go down the drain and can be recovered at a later stage.”

“Whatever money we give, we would want to get it back and that assurance is not visible. Things will be clearer once we are able to move ahead with the planned resolution process,” the person added.

The interim emergency funding of ₹400 crore sought by Jet Airways was supposed to help the airline keep at least some of its planes flying till the lenders found a buyer.

“We are not going to give emergency funding until we have a clear visibility of their cash flow. A large portion of the current revenue of the airline is being used to settle pending dues, IATA (International Air Transport Association) and credit card charges, etc.,” said the second banker.

“There is no point of additional funding at this moment, since valuation of the airline will not change during the bidding process. Even if the services are grounded completely, the bidding process will not change,” the banker said. “As lenders, we have to see whether we will get back our money and in this case, we are not sure.”

On Tuesday, Jet Airways’ board met in Mumbai, where the management led by CEO Vinay Dube suggested the airline suspend domestic operations among other options.

“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,” the company said in a statement after the board meeting.

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 employees, 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. In the last few months, about 250 pilots have left the airline, while 23 more resigned on Tuesday, leaving their strength in the airline at about 1,300.

In a separate statement, Jet Privilege Pvt. Ltd said the value of JPMiles was secure and remained intact.

“With our air reward offering, “Select Flights”, members have the choice to redeem their JPMiles to fly free across more airlines, any destinations, any flights and any seats in India and globally, starting with the same JPMiles requirement as before, which was applicable on Jet Airways and its partner airlines,” it said.

Gopika Gopakumar and Shayan Ghosh contributed to this story.