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Jet Airways ‘Compelled to Cancel’ All Flights After Failure to Secure Funding
India’s beleaguered carrier Jet Airways issued a statement on Wednesday suspending all flight operations. The airline, which had cancelled all international and some domestic services from last week and was left with only five aircraft in service, advised that the State Bank of India (SBI)representing a consortium of Indian lenders was “unable to consider its request for critical interim funding.”
The statement referenced multiple attempts over the last several months to secure both interim and long-term funding, but all attempts had failed resulting in the action.“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.”
Jet Airways, which has been in service for over 25 years, advised that they will keep services in operation which support passengers and the re-commencement of flight operations. The Founder of Jet Airways, Naresh Goyal, has been strongly criticized for the strategy the airline undertook and sources in India have laid the blame for Jet’s troubles directly with his management style.
As part of a debt resolution strategy with SBI last month, Goyal was forced to relinquish control after multiple attempts to refinance came to nothing. Another contributing factor to Jet Airways’ situation has been the low value of the Indian Rupee against the U.S. dollar, leading to increased costs for the purchase of fuel.
Responding to Wednesday’s announcement by Jet Airways and the possibility of flight operations resuming in the future, the SBI and the consortium they represent said: “The Expressions of Interest (EOI) have been received and bid documents have been issued to the eligible recipients today. The bid documents inter alia has solicited plans for a quick revival of the company. The bid process will conclude on 10th May 2019. We are actively working to try and ensure that the bid process leads to a viable solution for the company.”
The Hindu Business online reported that Etihad Airways, who holds an investment in Jet Airways, the Indian government-backed National Infrastructure and Investment Fund (NIIF) and private equity firms Indigo Partners and TPG are the four potential investors receiving the bid documents. In a letter to the Indian Government on Tuesday, the airline advised that without the require interim cash injection of $58 million it would not be able to refund passengers who had booked online and that 22,000 families would be affected.
The airline currently owes a significant amount to suppliers, staff and oil companies from the last few months and is reported to have a total debt in excess of $1.1 billion. Lessors have sought to have aircraft de-registered with the Indian Civil Aviation Authority so they can be leased to other carriers, seeking to fill the gaps caused by the worldwide grounding of Boeing’s 737 MAX aircraft and the subsequent reduction in aircraft production.
This will undoubtedly impede Jet Airways’ chances of restarting flight operations anytime soon as they will need to re-secure aircraft. In response to Jet Airways’ announcement of the cessation of flight operations, other carriers have sought to provide additional capacity on some routes and the price of fares have unsurprisingly increased.
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