India's Jet Airways to suspend operations after banks reject funding request

Published April 17, 2019
The airline, with $1.2 billion of bank debt, has been teetering for weeks after failing to receive a stop-gap loan. — Reuters/File
The airline, with $1.2 billion of bank debt, has been teetering for weeks after failing to receive a stop-gap loan. — Reuters/File

India's embattled Jet Airways Ltd is set to temporarily halt operations from Wednesday onward after its lenders rejected the airline's plea for emergency funds, three sources from inside the company said on Wednesday.

The airline, saddled with roughly $1.2 billion of bank debt, has been teetering for weeks after failing to receive a stop-gap loan of about $217 million from its lenders, as part of a rescue deal agreed in late March.

Separately, two sources at state-run banks told Reuters on Wednesday that the banks had rejected the 4 billion rupees ($58 million) that Jet had sought to keep itself temporarily afloat, while its lenders attempted to identify an investor willing to acquire a majority stake in the airline and attempt to turn it around.

“Bankers did not want to go for a piecemeal approach which would keep the carrier flying for a few days and then again risk having Jet come back for more interim funding,” said one of the bank sources directly involved in Jet's debt resolution process.

All five sources declined to be named as they have not been authorised to discuss the matter with media.

Jet and its lead lender State Bank of India (SBI) did not immediately respond to requests for comment.

At its peak, Jet operated over 120 planes and well over 600 daily flights.

The airline, once India's largest private carrier, has been forced in recent weeks to cancel hundreds of flights and to halt all flights to overseas destinations.

The crisis at Jet, which owes vast sums to suppliers, pilots lessors and oil companies, has deepened in recent weeks as its lessors have scrambled to de-register and take back planes, in a sign the bailout plan had failed to assuage their concerns.

India's aviation regulator said on its website on Wednesday that lessors had applied to de-register another four Boeing Co 737 planes.

An analysis of the latest data disclosed by the Directorate General of Civil Aviation shows that Jet's lessors have, so far, sought to deregister and repossess at least 48 planes operated by Jet.

Once deregistered, lessors are free to reclaim a plane and lease it to another airline.

The rapid exodus of planes risks further eroding value from the carrier, even as lenders scurry to find an investor willing to buy a majority stake in the debt-laden airline and attempt to turn it around.

Its lenders, led by SBI, have been seeking expressions of interest for an up to 75 per cent stake in the airline. Initial expressions bids were submitted last week.

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Digital growth
Updated 25 Apr, 2024

Digital growth

Democratising digital development will catalyse a rapid, if not immediate, improvement in human development indicators for the underserved segments of the Pakistani citizenry.
Nikah rights
25 Apr, 2024

Nikah rights

THE Supreme Court recently delivered a judgement championing the rights of women within a marriage. The ruling...
Campus crackdowns
25 Apr, 2024

Campus crackdowns

WHILE most Western governments have either been gladly facilitating Israel’s genocidal war in Gaza, or meekly...
Ties with Tehran
Updated 24 Apr, 2024

Ties with Tehran

Tomorrow, if ties between Washington and Beijing nosedive, and the US asks Pakistan to reconsider CPEC, will we comply?
Working together
24 Apr, 2024

Working together

PAKISTAN’S democracy seems adrift, and no one understands this better than our politicians. The system has gone...
Farmers’ anxiety
24 Apr, 2024

Farmers’ anxiety

WHEAT prices in Punjab have plummeted far below the minimum support price owing to a bumper harvest, reckless...