Business & Finance

The Jet story- Going, Going, Gone

It is a mystery as to how banks have been confident of roping in a new investor/partner for Jet Airways, which was wholly unwarranted.


It was in mid-February 2019, that Naresh Goyal, the promoter of Jet Airways, put up his hands, refusing to invest any further funds in the troubled airline that he founded. Perhaps he was unable to game the system any further and the best strategy was to exit from his mismanaged baby and hand it over to someone else. Surprisingly, the lending banks of Jet were easy suckers. They immediately took responsibility for the troubled bungled airline. They took over the airline by allotting to themselves, a 50.10% shareholding in the company, for consideration of rupee one. The banks also said that they would pump in additional loans of Rs.1500 crores in order to keep the airline afloat, till they brought in a new promoter to take over the airline, by mid-June 2019. The bankers’ confidence to bring in a new promoter was completely misplaced and speculative and their decision to pump in more money in an airline that had been floundering and had now been abandoned by its own promoter simply made no sense. It all started falling apart in March itself when the bankers refused to pump in any more money, though they had promised to do so. With no money to pay for fuel, salary and lease rent for the planes, the closure of the airline was inevitable, which it did some time in mid-April 2019. Such closure of the 27-year-old airline, which at one time was India’s biggest, was no surprise at all, but the false confidence and bravado of the bankers that they would turnaround the airline and revive its fortunes, utterly was.


Despite this turn of events and Jet losing its value with each passing day, the bankers remained confident that they would bring in a new buyer for the closed airline. As if it was a much demanded valuable trophy asset, they solicited bids from a select few only and expectedly received no serious bid whatsoever. The only non binding and conditional bid that came was from Etihad, an existing minority owner of Jet, who said that it was willing to be a junior partner in the airline, if the bankers got in an investor, that too only if the bankers were willing to write off 80% of their loans to Jet. Such a conditional, half hearted bid is no surprise at all. Who will take over a crisis-ridden closed airline, with bank loans of Rs.9000 crores, other liabilities of Rs.6000 crores and a host of legacy issues as more and more criminal investigation agencies like the SFIO, ED, ITD, etc. swoop in to probe charges of siphoning of funds, money laundering etc.


It is estimated that you need an investment of Rs.20000 crores to take over and revives Jet, which an investor is better off investing in a new airline and starting it from a scratch, with no legacy issues to face and no need to deal with a huge mountain of corporate and financial mismanagement and numerous investigation agencies. It is a mystery as to how banks have been confident of roping in a new investor/partner for Jet Airways, which the turn of events confirm, was wholly unwarranted.


The airline now is a closed entity. Its fleet of planes and pilots is gone and its valuable landing rights, flying routes etc. are in imminent danger of being allotted to many other competitors, who are eagerly eying them. Reports say that many of them have already been allotted. Even when it is a closed entity it is said to incur losses of Rs.120 crores per month. There nothing left of the valve in Jet Airways now, to attract a new buyer. The attempt of bankers to get a solicited bid has failed miserably. And now what is coming are the most unsolicited bids, from parties one has heard little about. An unknown entity from Mumbai called the Darwin group which claims to have assets of Rs.24000 crores has put in a bid and so has one AdiGro group of London. They all come with fabulous promises of making investments, which seasoned industry players like Etihad have refused. Their eligibility and track record is unknown, but the desperate bankers are now willing to talk to anyone, who is willing to take this crisis baby off their lap. It is said that they have now approached the Hinduja Brothers for help, which like any other investor have said that the banks will need to substantially write off their loans to Jet, which looks impossible. Which government can justify such a preferred write off of bank loans to Jet, which was denied to Kingfisher Airlines.?

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