More than Naresh Goyal, Bankers are to blame

Yesterday was a judgement day of sorts, for the beleagured Jet Airways, India’s former top airline. The banks refused to provide any more funds to keep it afloat. With the lenders to Jet, unwilling to pump in the promised Rs.1500 cr., which they had said that they would do, when they took over the troubled airline in mid February 2019, the airline is now heading to an imminent closure. It immediately needs Rs.1000 crore to merely stay afloat and to sustain the airline till a new buyer comes on board by mid June 2019, which the bankers now refuse to provide. Jet has an empty kitty and has no funds to pay its daily operational costs, which include jet fuel, lease rentals, salaries and airport charges. A mere 7 planes are now flying out of its earlier fleet of 119, the rest having been grounded/seized by the plane owners. Jet has suspended all its international flights at present and flies a mere 25 domestic flights, as against hundreds a day that it did earlier. These are perhaps to meet the minimum DGCA criteria, which mandates that there must be at least five planes flying, in order to retain its airline licence.

The worst affected are the 20,000 employees of Jet Airways, who have not been paid their salary since months and also the flyers, who face delayed refunds due to flight cancellation and much higher fares for alternate tickets. While the PMO is said to be monitoring the crisis, its pilots have pleaded intervention of the PM, in order to save the airline. The financial position of Jet is precarious, with unpaid dues to one and all including banks, lessors, vendors, staff, fuel companies and also statutory dues to the government. Any buyer will need to pump in at least Rs.15000 crores in order to revive the airline, which appears to be a steep price for an airline with numerous legacy issues of financial mismanagement, siphoning of funds, unknown liabilities and lapses in governance and regulatory compliances. The bankers have called for bids for takeover of the airline and are said to have received eight bids, including one from Naresh Goyal himself, as we had predicted. The new management is likely to takeover the airline in mid June 2019, which as per present state of affairs may not exist at all, with banks refusing to pump in funds to keep the airline operations going, in the interim period.

The entire saga of Jet Airways and its likely closure, has been a tale of mismanagement, not just by the promoter Naresh Goyal, but also by the banks themselves who have a combined exposure of over Rs.8000 crores in an airline, which has recorded a profit only twice in the last 12 years and continues to bleed cash copiously. It was as recent as in February/March that banks took over the airline and confidently said that they would get a buyer for it and surprisingly even they said that by April over 60 airlines of Jet would be flying, as against a mere 7 now. The negligence of bankers is evident in our following questions to them:-

1. How were bankers willing to take an exposure of over Rs.8000 crores to a consistently loss making entity, in an industry with wide fluctuations in fortunes? Why was it given such a preferred treatment?
2. When Jet was incurring loss after loss, year after year and a crisis was imminent, then why did the bankers let the situation deteriorate and let the crisis take an unmanageable proportion?
3. With the airline having legacy issues that can haunt any buyer, how were the bankers so optimistic that a buyer will emerge for the airlines in such a short period of time.
4. Why have the bankers now developed cold feet and are unwilling to invest additional funds to keep the airline afloat in the interim?
5. In the matter of takeover of Jet, why have the banks not take a lessons from the Air India experience, which got no buyers at all, and remain so hopeful?