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Twenty-five years after its first flight took off, Jet Airways on Wednesday said it has temporarily cancelled all domestic and international flights with immediate effect due to lack of funds to keep it afloat. The airline had issued a plea to the banks to release ₹400 crore in interim funds but the lenders declined.
“Late last night, Jet Airways was informed by State Bank of India, on behalf of the consortium of Indian lenders, that they are unable to consider its request for critical interim funding. Since no emergency funding is forthcoming, the airline will not be able to pay for fuel or other critical services to keep the operations going,” said a statement from Jet Airways.
“Consequently, with immediate effect, Jet Airways is compelled to cancel all its international and domestic flights. The last flight will operate today (Wednesday),” it added. Jet was operating just five planes on Wednesday.
Over the past several months, the company had tried to seek both interim and long-term funding. But the lenders were in no mood to budge as the company could not bring any collateral for the loan. The only hope for the airline now will be a new owner.
The lenders, after calling for Expression of Interest (EoI), short-listed four potential investors: Gulf airline Etihad Airways, state-owned National Infrastructure and Investment Fund and private equity firms Indigo Partners and TPG. The bid process will conclude on May 10.
“The solution for Jet lies in fasttracking the bid process and getting a new, and serious, investor as soon as possible,” said Jitendra Bhargava, aviation expert and former Air India official. “The real problem started when there was confusion over (Jet promoter) Naresh Goyal stepping down. Had he stepped down earlier, this situation would not have arisen.
“The banks, too, did not have a plan ready; nor did they have the funding ready. They should not have created optimism if they weren’t going to be able to deliver.”
“Now, the only hope is to get credible bidders, and the lenders getting the confidence to restart the airline,” said Dhiraj Mathur, former Partner at PwC.
Employees stranded
The development leaves thousands of Jet employees stranded, as they have not been paid salaries for the past few months.
Jet CEO Vinay Dube, in a communication to the employees, said: “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’.”
The other impact would be on airfares, which are bound to surge with the absence of a key player in the market. According to John Nair, head of business travel at Cox & Kings, domestic and international airfares in the near term have seen an increase of 25-30 per cent. However, as other airlines increase their fleets to fill the gap, things could ease up.
Also read : Jet Airways gets no interim fund; emergency board meet on April 16
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