But how did India’s top airline get to the stage of bankruptcy? ABTV’s Shruthi Nair explains.
Let’s go back to the mi- 2000s when a slew of budget carriers like Indigo, Go Air, Spice Jet etc. started entering the market proving to be a threat to the existing full service airlines.
In a sort of a response to this, Naresh Goyal, the founder chairman of jet airways decided to purchase Air Sahara for 500 million dollars in cash, which people said was a bad idea, Anyhoo, he paid no heed, went ahead with the purchase, renamed it JetLite and by 2015 realised that it actually was a very bad idea and wrote it off.
Adding to all of this, provincial taxes of 30% on jet fuel added to their expenses.
So basically, since 2008 Jet Airways has been running on losses, except for 2 years in between.
Despite Abu Dhabi’s Etihad Airways PJSC taking a 24% stake in the airline in 2013 for 379 million dollars, Jet Airways just kept slipping deeper into negative equity.
But it’s not just the losses, the major problem is the money they owe. The debt-ridden airline is estimated to be facing a total claim of about $3.5 billion – including loan defaults, delayed staff payments, payments to lessors and suppliers.
But there was a proposal by a group of lenders led by the State Bank of India to take a 51 per cent stake for Re 1 through the issuance of 114 million new shares in the first quarter of this year.
But that also fell through and soon we saw the airline being grounded with 23,000 very unhappy employees.
SBI Capital Markets, which is advising the State Bank of India-led lenders’ consortium to the grounded airline in the process of finding new investors for the carrier, is understood to have reached out to several potential investors, including overseas airlines and private equity investors.
They had received expressions of interest (EoIs) from three interested parties – two financial investors and another global company, but last week one of them, Volcan Investment pulled out.
Etihad Airways, which did not submit an EoI, said it decided against reinvesting in the troubled carrier because of “unresolved issues concerning the airline’s liabilities”.
To be honest, this hasn’t been easy for Etihad either. It scrapped routes and cut thousands of positions, putting the brakes on a costly expansion after almost $3.5 billion in losses in two years. It just slashed orders worth $21.4 billion for Boeing Co. and Airbus SE jetliners, after a strategy of buying into sick airlines around the world backfired.
(Source: Arabianbusiness.com YouTube channel)
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