Jet Airways stops all operations

By T.E. | MUMBAI

IT HAS BEEN a slow, painful, descent. For months, Jet Airways, once India’s second largest airline, has been failing. Planes were grounded for non-payment of leases, fuel deliveries stopped, flights inevitably cancelled, frustrated customers denied access to lounges and subject to unending frustrations. Unpaid pilots loudly threatened to strike and quietly disembarked to work for competitors. Non-stop meetings were held by investors and lenders to concoct a rescue plan, but little progress towards one was made. When an announcement finally came on April 18th that all flights had been suspended, it was hardly a surprise.

The final blow was the unwillingness of a consortium of banks to release emergency funding. They had been burned during the collapse of Kingfisher Airlines in 2012 in similar circumstances. And they had no faith that the outcome would be any different this time around. There had been some moments of optimism, most strikingly in March when the airline’s founder and controlling shareholder Naresh Goyal voluntarily agreed to surrender control. That had sparked hope that Etihad Airways, which held a 24% stake, would step forward. And it was widely believed that in the final states of a national election campaign, the administration of Narendra Modi would not allow Jet to collapse. Quiet steps would be taken to push state-controlled banks to do whatever was required to keep it afloat.

But a lack of confidence in the airline’s management proved overwhelming. The government did not intervene to save the airline. And Etihad, burned by the bankruptcy of Air Berlin and Alitalia in 2017, two other airlines in which it had stakes, was loathe to throw more good money after bad. The announcement that all operations were grounded came through a notice filed to the Bombay Stock Exchange saying that a consortium of lenders led by the country’s largest financial institution, the State Bank of India, had denied the company’s request for more money.

What happens next, particularly to the 16,500 or so workers it directly employs is unclear. A sale process is under way, with hopes that it will be completed by the end of May. But whether there is anything left to be sold depends on what, by then, are the company’s assets. Its planes were largely acquired through leases that have been voided because of non-payment. Many of its best employees will have left for other companies.

That leaves what has been its most valuable asset since it was founded in 1993: the landing and take-off slots it has accumulated at airports in Mumbai and Delhi. But these apparently come with conditions of usage that are likely to have been violated by the suspension of flights. Whether the landing rights are retained by the administrators or are reallocated for free to other carriers–as competitors hope—will play a large role in what now unfolds along with a second issue that has so far received little attention. Air India, the country’s state-owned flag carrier, is in deep financial trouble as well. A restructuring has been tried and delayed because of the political sensitivities involved and the clout of its trade unions. But as with Jet, its problems cannot be ignored indefinitely. Many believe the time for such a large undertaking to occur will be after the next election—which will be concluded as early as next month.