India's Jet Airways suspends all flights

[webfact]

India's Jet Airways finds itself out of runway as funds dry up

By Tanvi Mehta, Promit Mukherjee and Aditi Shah

 

FILE PHOTO: Jet Airways aircrafts are seen parked at the Indira Gandhi International Airport in New Delhi, India, April 13, 2019. REUTERS/Anushree Fadnavis/File Photo

 

MUMBAI/NEW DELHI (Reuters) - Embattled Jet Airways halted all flight operations indefinitely on Wednesday after its lenders rejected its plea for emergency funds, potentially bringing the curtains down on what was once India's largest private airline.

 

The carrier, saddled with roughly $1.2 billion of bank debt, has been teetering for weeks after failing to receive a stop-gap loan of about $217 million from its lenders, as part of a rescue deal agreed in late March.

 

"The airline has been left with no other choice today but to go ahead with a temporary suspension of flight operations," the company said in a two-page statement late on Wednesday.

 

At its peak, Jet operated over 120 planes and well over 600 daily flights. The airline, which has roughly 16,000 employees, has in recent weeks been forced to cancel hundreds of flights and to halt all flights out of India, as funds have dried up.

 

Intense competition from low-cost carriers, like Interglobe-owned IndiGo and SpiceJet Ltd, together with higher oil prices, hefty fuel taxes and a weak rupee have piled pressure on the airline in recent months.

 

For an interactive graphic, click https://tmsnrt.rs/2Wz3rQ5

 

In its statement on Wednesday, the airline thanked its loyal customers for their support over 25 years and said it "sincerely and profusely apologises for the disruption to the travel plans of all its guests."

 

"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.

 

Two sources at state-run banks told Reuters that the banks had rejected a request for 4 billion rupees ($58 million) from Jet to keep itself temporarily afloat.

 

"Bankers did not want to go for a piecemeal approach which would keep the carrier flying for a few days and then again risk having Jet come back for more interim funding," said one of the bank sources directly involved in Jet's debt resolution process.

 

SALE PROCESS

The airline said it would continue to work with its banks, who are trying to identify an investor to buy a majority stake and try to turn Jet around. Jet said that it hopes to resume flying soon.

 

Its lenders, led by State Bank of India (SBI), last week accepted expressions of interest for an up to 75 percent stake in the airline.

 

In a tweet, India's Ministry of Civil Aviation said it would support the bank-led resolution process to rescueJet, adding it expects the process to end by May 10.

 

CNBC-TV18 reported on Tuesday that Jet's lenders were set to invite binding bids from four shortlisted suitors that include private equity firms TPG Capital and Indigo Partners, Indian wealth fund National Investment and Infrastructure Fund (NIIF), and Etihad Airways, which already owns a minority stake in Jet.

 

It is still far from clear though, whether a firm bid will emerge and if a buyer will be identified in time.

 

Shares in the company, which have tumbled about 60 percent in the last year, closed on Tuesday at 240.50 rupees a share. Indian markets were closed on Wednesday due to a public holiday. Jet still has a market capitalization of nearly $400 million, as investors have clung onto hopes of a rescue deal being clinched.

 

Jet's CEO Vinay Dube, in a letter to employees on Wednesday that was seen by Reuters, warned that the sales process would take some time and could throw up several more challenges, but he added that he was confident Jet Airways would fly again.

 

EMPLOYEE ANGER

If Jet fails to attract a buyer and collapses that would put thousands of Jet's employees out of jobs, many of whom have been unpaid for weeks or months, and affect thousands of others whose jobs are tied to the fortunes of the airline.

 

Jet's failure would also be a blow to Indian Prime Minister Narendra Modi, who is currently seeking re-election in a weeks' long general election. Modi's critics blame his government for rising unemployment.

 

Some employees on Wednesday also blamed the government for failing to do enough to rescue Jet.

 

"We had appealed to everyone, including the prime minister," said Asim Valiani, vice president of Jet's main pilots' union, the National Aviators' Guild. "At least now we know the talk about caring for employment and creating jobs was all eyewash."

 

He said the guild was exploring dragging Jet to a bankruptcy court over unpaid dues.

 

 

Jet employees are expected to hold a demonstration in New Delhi on Thursday, while the union representing its ground staff is expected to host a press conference in Mumbai.

 

LESSORS FLEE

A Jet collapse would also be a potential blow to Boeing Co, which is already grappling with the fallout of two recent fatal crashes involving its 737 MAX aircraft. Jet has more than 100 of the 737 MAX planes on order.

 

The crisis at Jet, which owes vast sums to suppliers, pilots, lessors and oil companies, deepened in recent weeks as its lessors scrambled to de-register and take back planes, in a sign the bank rescue plan failed to assuage their concerns.

 

India's aviation regulator said on its website on Wednesday that lessors had applied to de-register another four Boeing Co 737 planes. Overall, Jet's lessors have, so far, sought to deregister and repossess at least 48 planes operated by Jet. Once deregistered, lessors are free to reclaim a plane and lease it to another airline.

 

The rapid exodus of planes risks further eroding value from the carrier, even as lenders scurry to find an investor to pour new money into the airline.

For an interactive link, click https://tmsnrt.rs/2HTmgKl

 

(Reporting by Tanvi Mehta and Promit Mukherjee in Mumbai and Aftab Ahmed and Aditi Shah in New Delhi; Writing by Euan Rocha; Editing by Louise Heavens and Susan Fenton)

 

-- © Copyright Reuters 2019-04-18

 

[Ulic]

Always a head scratcher that some airlines can get things so wrong and get into such debt while others remain at least marginally profitable. With fuel surcharges, most of the variables are removed from the equation. Just passenger loads are variable. Plane leasing and staffing are a fixed cost, as are airport fees. The operators just have to have good staff/service and keep the planes full.

[natway09]

Too many bludgers ?

[Baerboxer]

23 minutes ago, Ulic said:

Always a head scratcher that some airlines can get things so wrong and get into such debt while others remain at least marginally profitable. With fuel surcharges, most of the variables are removed from the equation. Just passenger loads are variable. Plane leasing and staffing are a fixed cost, as are airport fees. The operators just have to have good staff/service and keep the planes full.

 

Hopefully a good fresh audit might reveal where the money has been going. Not uncommon in India for high salaries, bonuses, generous expenses etc etc for those at the top regardless of how the business has been doing.

 

I flew with Jet internally in India many years ago. A return day trip for a business meeting. They tried to bump me off the flight on the return as the plane was overbooked. My client, a rather well known aggressive local CEO, his FD, and our agent went ballistic at them. The girl, only following orders, called her manager. He walked me through security to board the plane and put me in a business class seat. Without the help of my client and agent, I'd have just been stranded at Jet's convenience. Avoided them after that. Never heard much good about them.

[Sir Swagman]

A reasonable rule of thumb is.....if an airline has more employees than aircraft seats.......why?

[thaibeachlovers]

All eco warriors should be rejoicing. It's time to take pollution seriously and ground all domestic air travel. Hi speed trains are almost as good and take less space ( no large airports needed ).

 

I'm glad my international travel days are over, as the thought of being crammed into one of those disgusting cheap airlines would be horrifying to me. I few one a couple of times but never again by choice.

[Lucius verus]

Very 

6 hours ago, observer90210 said:

Has the Donald offered him a job to take over the US Border Patrol and to elaborate a new visa rules ?

 

19 hours ago, Richard Kuklinski said:

By the time the Thai's finish with him, he will be charged with running a terrorist training camp for the purpose of overthrowing the Thai government and Thai monarchy.  He's probably on his way to Dubai, as we speak.  ????

 

if only he had paid to use a few square meters of Thai ocean, none of this would have occurred.  ????

 

Meanwhile, Thai authorities are looking at building more seasteads as a form of tourist attraction accommodation.  ????

Very odd country India. Same population as China and some would say in a better strategic position in the world. They speak English and have British institutions as a foundation stone to build on. Certainly didn't do Canada or Australia any harm.

They even play bloody cricket..lol

Their problem is appalling corruption and a broken enormous beaurocracy.

I've been there.They just don't seem to be able to organise anything with western or NthAsian efficiency.

All they have is Bollywood which makes Hollywood look tiny. Millions go to the pics everyday. Nothing else to do unless you can afford cricket gear.

[mercman24]

Thai Airways are bankrolled by the government or else they would be in the same boat

[thaibeachlovers]

14 hours ago, thaibeachlovers said:

All eco warriors should be rejoicing. It's time to take pollution seriously and ground all domestic air travel. Hi speed trains are almost as good and take less space ( no large airports needed ).

 

I'm glad my international travel days are over, as the thought of being crammed into one of those disgusting cheap airlines would be horrifying to me. I few one a couple of times but never again by choice.

I meant "almost as fast", not "almost as good". Apologies.

[thaibeachlovers]

14 hours ago, Lucius verus said:

Very 

 

Very odd country India. Same population as China and some would say in a better strategic position in the world. They speak English and have British institutions as a foundation stone to build on. Certainly didn't do Canada or Australia any harm.

They even play bloody cricket..lol

Their problem is appalling corruption and a broken enormous beaurocracy.

I've been there.They just don't seem to be able to organise anything with western or NthAsian efficiency.

All they have is Bollywood which makes Hollywood look tiny. Millions go to the pics everyday. Nothing else to do unless you can afford cricket gear.

I think they must spend a lot of time reproducing though. More fun than cricket too, or at least the act of insemination is, though having to find a huge dowry for the girls must be a drag.

[gunderhill]

14 hours ago, thaibeachlovers said:

being crammed into one of those disgusting cheap airlines would be horrifying to me.

That's  why they invented  business  class which over the last 10  years has  improved to first class  standards on some airlines.

[thaibeachlovers]

3 minutes ago, gunderhill said:

That's  why they invented  business  class which over the last 10  years has  improved to first class  standards on some airlines.

Nice if you can afford it. Most can't, which is why more fly economy than business.

But you knew that.