What went wrong with Jet Airways, lenders plan to sell 75% stake
By MYBRANDBOOK
The airline is credited with successfully as India’s second-biggest carrier, but its fleet has dwindled to 26 planes from 124 as recently as January. Cash-strapped Jet Airways and decided on the timeline for the stake sale. Jet Airways India Ltd.’s lenders invited initial bids to buy as much as 75 percent of the debt-laden carrier, starting a process that will determine the future of India’s oldest surviving private airline. A question comes when Naresh Goyal could not run his Airlines, now who would be the next entrepreneur will able to run this debt-ridden Airlines.
Accumulated losses in nine years have caused Jet Airways to delay payments to banks, lessors and employees, while its founder Naresh Goyal was forced to cede control of the carrier.
Potential buyers must submit their interest by April 10, State Bank of India Ltd., the lead creditor, said in a document Monday. A strategic bidder should have a net worth of at least Rs 1,000 crore ($144 million) or three years of experience in the aviation business. Whereas, for a financial investor's company it would be with at least Rs 2,000 crore of net-worth. In case if the bidder is a consortium, it shall consist of not more than 3 (three) members with shareholding of an individual member not being less than 15 per cent.
Jet Airways, part-owned by Abu Dhabi’s Etihad Airways PJSC, needs Rs 8500 crore to get back on its feet after a fare war by budget airlines wiped out profits and it racked up debt of more than $1 billion.The fate of Jet Airways is crucial to the legacy of Indian Prime Minister Narendra Modi as he faces an election that begins April 11 after holding power for the last five years. A collapse of Jet Airways, with 23,000 employees, could further dent the growth of the country.
A report says, the bank group had agreed to take a 50.1 percent stake at an effective cost of 1 rupee through the issuance of 114 million new shares in an attempt to bail out the carrier. It was a maneuver that was allowed under a framework outlined by the Reserve Bank of India last year for companies with a negative net worth as a temporary measure. However, a surprise ruling by India’s top court last week squashed that framework and raised questions once again about the airline’s future.
The debt-ridden airline has a gross loan of Rs 8,400 crore and 91 aircraft grounded on account of non-payment of dues to the lessors with the pending salaries of pilots, engineers and general managers for the past three months. The last date for submission of EoIs was April 10.
It’s unclear what happened to as much as 15 billion rupees of immediate funding that banks said last month they would provide the carrier. Earlier, the Indian government was said to be looking into options to save jobs at Jet Airways, including by asking other airlines such as low-cost operator SpiceJet Ltd. to consider taking over some aircraft, according to the report.
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