Jet Airways decided to temporarily suspend all the domestic & international flight operations yesterday due to no cash to run more operations.
“We got the information just 10 minutes back. We are still trying to process it,” said a person in the know.
While Jet had been running a bare minimum number of 35-40 flights for the last few days, a total grounding will significantly affect its value for potential investors that are undergoing bidding the process to invest in the airline. Jet’s shares yesterday fell close to 20% on rumors of imminent shutdown. It closed 8% down at about Rs 242 on Tuesday close. Markets were shut on Wednesday.
There are fears of its license being subsequently suspended if it doesn't get its flights back up. India’s aviation regulator hasn’t referred to any such action yet.
“There is laid down-regulation for each situation. We shall follow what is appropriate for a given one,” a senior official at the Directorate General of Civil Aviation.
Jet ran an operation of 6 planes since morning yesterday. The decision was taken in the afternoon.
The move came after Jet’s last-ditch attempt to raise interim loans to keep the airline running, failed yesterday evening. CEO Vinay Dube had approached the lenders with an appeal for Rs 400 crore. The banks refused to release any funds without additional collateral.
The grounding had been imminent to the airline’s management for some time, with the skeletal operations just a soupcon of Jet’s original 124-plane network which made it India’s second-biggest flyer of passengers till January.
Meanwhile, its lenders have selected Etihad Airways that owns 24% of the airline, PE investors TPG Capital and Indigo Partners as well as the state-run National Investment and Infrastructure Fund as qualified bidders. They have to submit binding bids by May 10. The process to find a buyer will stretch longer. Jet may not have the time.
Jet, India’s oldest surviving private airline, started in 1993 as an air taxi operator and grew to become its biggest carrier with a premium international network. It faced tough competition in the 2000s from competitors such as Air Sahara, Kingfisher Airlines and several low fare carriers such as IndiGo and SpiceJet.
Jet bought Air Sahara in 2007 for Rs 2,050 crore in a deal which troubled it for years later with additional costs, taxes as well as legal and manpower issues. It faced its first major crisis in 2011-12 and subsequently sold 24% stake to Etihad for $379 million in 2013.
The latest crisis started in March 2018 with delayed salary payments for employees and a 25% pay cut for top management. It escalated sharply between January and March 2019 with the airline grounding more than 100 planes.