After flying for 25 years, Jet Airways on Wednesday announced temporary grounding of operations after its lenders declined a Rs 400-crore lifeline, putting at stake 20,000 jobs and thousands of crores in passenger refunds, dues to vendors and over Rs 8,500 crore to banks.
Founded by Naresh Goyal, who began as a general sales agent to a host of international airlines with travel agency Jetair, the full-service carrier served tens of millions of passengers for over two-and-half decades, before becoming the seventh domestic carrier to shutter operations in the past five years.
However, the once-premier airline flew into deeper turbulence -- second in its history after the 2010 crisis -- after four back-to-back quarterly losses, leaving it gasping for financial breath and forcing it to default on payments to nearly all, from banks to lessors, to employees, and eventually leading to the shutdown from Wednesday night as its fleet strength has crimped to just about five planes from 123 in December last.
"Since no emergency funding from the lenders or any other source is forthcoming, we will not be able to pay for fuel or other critical services to keep the operations going. "Consequently, with immediate effect, we are compelled to cancel all our international and domestic flights temporarily. The last flight will operate today," Jet Airways said in an evening statement.
The troubles at Jet sent airfares soaring and its pains were the gains for rival carriers like IndiGo and Spicejet which took over most its slots at premium airports. The formal grounding announcement will lead to exponential spike in airfares amid the peak summer travel demand.
Under a debt resolution plan approved by the airline's board on March 25, Goyal agreed to cede control to the lenders consortium and also resigned from the chairmanship. His wife, Anita, too quit the board. He had also agreed to halve his stake in the airline to around 25 percent.
But the April 2 Supreme Court order quashing the February 12, 2018 RBI circular (which ended all debt recast plans even on a one-day default) put paid to the resolution plan as banks were left with no leeway to restructure the loan and pay the promised Rs 1,500 crore interim funds which would have been converted into equity at Re 1 a share and also take over the management control.
Before its last flight on Wednesday night from Amristar to Delhi, Jet's fleet diminished to just five aircraft and 37 flights from 123 planes and some 650 daily flights till December last.
"This (temporary grounding) decision has been taken after a painstaking evaluation of all alternatives that were made available to the airline and after receiving guidance and advice on the same from the board," the airline said, adding it has informed the civil aviation and finance ministries besides the regulator DGCA, of its decision. The carrier, however, said it will now await the bid finalisation process by the lenders.
Earlier this month, SBI Caps, on behalf of the lenders, had invited bids for selling between 32.1 per cent and up to 75 per cent stake in the airline and the bids were open from April 8 through 12 after a two-day extension.
The airline said the expressions of interest were in and bid documents were issued to the eligible recipients Wednesday. Banks Tuesday identified four bidders -- Etihad Airways, the national investment fund NIIF, private player TPG and another fund house Indigo Partners as eligible bidders who have time till May 10 to submit the final financial bids.
"We are actively working to try and ensure that the bid process leads to a viable solution for the company," the airline said, adding it will continue to support the bid process initiated by the lenders.
"However, we must also be realistic that the sale process will take some time and will throw up several more challenges for us, many of which we don't have the answers as of today," chief executive Vinay Dube said in a communication to the employees.
"For example, we don't have an answer today to the very important question of what happens to the employees during the sale process," he said.
Meanwhile, JetPrivilege, the company that handles Jet's loyalty programme JPMiles, in a statement said, "We would like to assure our members that the value of their JPMiles are secure and remain intact as members still have the choice to redeem their JPMiles to fly free across more airlines and destinations anywhere."
Meanwhile, the Ministry of Civil Aviation (MoCA) said Wednesday it will support the resolution process within the existing regulatory framework. In its first reaction on the latest Jet Airways development, the ministry also said that the DGCA and other regulators are monitoring the situation carefully to ensure that all existing rules regarding refunds, cancellations, and alternate bookings are followed strictly.