It became the second major airline to shut down operations, even temporarily, this decade after Kingfisher in 2012.
MUMBAI: Jet Airways, India’s oldest private airline, decided to temporarily suspend all flights from Wednesday night as cash ran out and banks refused to give more money.
“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. Consequently, with immediate effect, Jet Airways is compelled to cancel all its international and domestic flights. The last flight will operate today,” the airline said in a statement.
Jet said the decision was taken “after a painstaking evaluation of all alternatives that were made available to the company and after receiving guidance and advice on the same from its board of directors”.
While Jet had already been running a bare minimum number of 35-40 flights for the last few days, a total shutdown, even temporary, will significantly affect its value for potential investors that are participating in a bidding process to invest in the airline. Jet’s shares yesterday fell close to 20% on rumours of an imminent shutdown.
It closed 8% down at about Rs 242 on Tuesday close. Markets were shut on Wednesday.
The Ministry of Civil Aviation posted from its official Twitter handle that it would “support the resolution process” for Jet.
“We are assisting airlines and airports to bring in capacity to ensure fares remain stable and competitive,” it also added in the post.
There are fears of Jet’s 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.
The move came after Jet’s last ditch attempt to raise emergency loans failed on Wednesday evening. The airline had approached the banks with an appeal for Rs 983 crore. The banks refused to release any funds without additional collateral.
The grounding had been imminent to the airline’s management for sometime, as it was flying a fraction of its original 124 plane network which made it India’s second biggest flyer of passengers till January.
It said that over the last few weeks it has “tried every means possible to seek both interim and long-term funding. Unfortunately, despite its very best efforts, the airline has been left with no other choice today but to go ahead with a temporary suspension of flight operations”.
“It’s an emotional day for us. We just want to focus on taking care of staff and guests,” said an executive.
Jet has defaulted on loans as well as vendor and lessor payments. It has been forced to ground planes since the beginning of the year primarily due to defaults to leasing companies. It hasn’t paid its employees since January.
In its statement, Jet said it will support the bidding process that is on to find it a new investor. 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.
In a letter to employees, CEO Dube said:“We know that India is better off with a flying Jet Airways and so do our potential investors”.
More than 12 major airlines have folded in the last few decades, starting with Vayudoot in 1997 to Air Pegasus in 2015-16.
The story that mirrors Jet closely is that of Kingfisher Airlines, Vijay Mallya’s cash-strapped airline which shut operations on October 1 2012, after gradually grounding flights for several preceding months.
“Even though we were fierce competitors, my sympathies go out to Naresh and Neeta Goyal who built Jet Airways that India should be extremely proud of. Fine Airline providing vital connectivity and class service. Sad that so many Airlines have bitten the dust in India. Why?” Mallya tweeted earlier Wednesday
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 1,450 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.