Jet Airways appears poised to go into insolvency at the end of this month as rescue plans flounder and the airline’s fleet is progressively grounded by aircraft lessors.
India’s second-largest carrier, Jet Airways was operating just one-third of its scheduled flights this week with all but 41 of its 123 aircraft on the ground.
Shareholder Etihad, which holds a 24% stake in Jet, said it would exit its joint venture with the airline rather than provide emergency funds.
That led Jet Airways to cancel all flights to and from Etihad’s base at Abu Dhabi.
Jet Airways chairman Naresh Goyal and his wife Anita Goyal are expected to leave the board of the cash-strapped airline today, accordin g to local reports.
Chief executive Vinay Dube is expected to stay on at the airline Goyal set up with his wife in 1993.
Earlier this month, Reuters reported that Goyal had agreed to step down as chairman and reduce his 51% stake in the airline.
India’s Economic Times previously reported that Etihad had asked the State Bank of India, which leads a consortium of Jet Airways’ lenders, to buy its stake.
In a statement, Etihad said: “Etihad is working closely with Indian lenders, the company and key stakeholders to facilitate a solution for Jet Airways.”
The Economic Times reported the Indian government “cannot afford the closure of the airline” in the run-up to a general election this spring.
But a rescue deal agreed in February is stalled by the failure of Jet Airways founder and controlling shareholder Goyal and Etihad to agree.
The deal would see India’s sovereign wealth fund NIF take a 20% stake in the airline, with lenders – led by the State Bank of India – taking almost 30% in a debt-for-equity swap.
That would put the sovereign fund and banks in joint control of the airline.
Etihad would provide an additional $230 million in funds while retaining a stake just below 25% – otherwise it would be legally required to make an outright takeover offer.
Goyal’s shareholding would be capped at a maximum 22%.
The issue is Goyal’s continuing involvement with Jet Airways. Etihad chief executive Tony Douglas made clear weeks ago that Etihad would provide no more money without Goyal’s removal.
While the wrangling continues, Jet is down to operating 150 flights a day of the 450 scheduled, with the costs of cancellations mounting and lessors poised to ground more aircraft for non-payment.
One source told the Economic Times: “The refund against cancellations is becoming a big problem.”
Jet is set to default on a further loan repayment of $109 million, for which Etihad is a guarantor, on March 28.
The carrier has not paid its pilots, engineers or other crew for more than three months and Jet Airways 1,900 pilots are reported to be deserting en masse.
The pilots have threatened to strike from April 1 unless they receive their back pay.
However, a government official insisted: “The fundamentals of the airline are intact and it only needs funding to revive.”
Meanwhile, Jet Airways’ Manchester-Mumbai route has been suspended.
Flights from the northern hub only started in November with Manchester as the carrier’s 21st international destination.
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