India’s oldest private airline company Jet Airways is now in a deficit of 8500 crore rupees i.e. 85 billion rupees.
it’s current shareholding pattern is as follows ;
- Promoter ie Naresh Kumar Goyal, having 51%.
- Foreign Contributor ie Etihad Airways 24%.
- other public ie Individuals 9%.
- institutional holding ie MF, LIC, FI 16%.
What they are planning as a Resolution plan is to ;
- reduce the holding of Naresh Goyal upto 25%
- introduce a new investor– India’s state-owned National Infrastructure Investment Fund (NIIF)
- NIIF along with Banks is proposed to hold more than 50% of the shares.
- Etihad Airways to cut to 12% and remaining with the public.
- resulting to this equity adjustment they can cure upto 40 billion rupees.
- 17 billion from sale and leaseback – also for the 17 billion rupees aircraft debt, they can sell 16 planes and lease them back.
that’s how a deficit of 57 billion out of 85 billion rupees can be plugged.
for the remaining 28 billion rupees, the gap will be closed only if the lender agrees to convert part of their loan into the quasi-equity-type instrument.
the plan shared above may look like work on papers, which is subject to further practical conditions.
The possible reasons of this phase is some loopholes in the governance and management, which are;
- Running full cost carrier at lower ticket pricing
- Allowing excessive perquisites know to that it is now loss making with no value additions to it
- Failure to target volume customer preferences of middle class travellers in the market , all they want to reach at destination not food or other amenities.
- Higher operating costs (fuel cost, foreign currency fluctuations)
As of now, SBI proposed for taking 50.1% shares for Re 1 and Etihad Airlines also proposed to sell 24% share to SBI @ Rs 150 per share.
Jet Airways has lost many employees as the crisis unfolded. About 400 pilots have moved to other airlines, leaving Jet with about 1,300 pilots,
On April 18, the aviation ministry formed a committee with representatives from Directorate General of Civil Aviation (DGCA) , Airports Authority of India and private airport operators to allocate Jet’s slots to other airlines.
It means all jet flights are now grounded officially which is painful for all its employees .
There are rumors that tata group can buy jet but there is no announcement from tata group yet.
However , SpiceJet will take between 30 to 40 of Jet’s Boeing 737s while Air India will take five of the wide body Boeing 777s of jet airways on wet lease . which means hired along with crew members of jet.
Gaurav Bohra
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