Key Jet Airways lender SBI says bankruptcy ‘last option’, rescue almost ready

A Jet Airways plane is parked as another moves to the runway at the Chhatrapati Shivaji International airport in Mumbai, India, February 14, 2018. — Reuters pic
A Jet Airways plane is parked as another moves to the runway at the Chhatrapati Shivaji International airport in Mumbai, India, February 14, 2018. — Reuters pic

NEW DELHI, March 20 — Bankruptcy is the “last option” for Jet Airways, State Bank of India’s (SBI) chairman said today, adding that it might still be possible to draft in a new investor to keep the airline flying.

“We believe it is in everybody’s interest that Jet Airways continues to fly,” SBI Chairman Rajnish Kumar told reporters after meeting government officials, adding that placing Jet into bankruptcy would mean grounding the airline.

The SBI chief said that a resolution plan is “almost” ready and that it would not involve a bailout for any individual, including the airline’s founder and chairman Naresh Goyal.

Jet has more than US$1 billion in debt, and owes money to banks, suppliers, pilots and lessors – some of whom have started terminating leases with the carrier.

The government has asked state-run banks, led by SBI, to rescue Jet without pushing it into bankruptcy, two people within the administration have told Reuters as Prime Minister Narendra Modi seeks to avert thousands of job losses weeks before a general election.

Talks with Etihad Airways, Jet’s largest shareholder, to secure a rescue deal are also ongoing, the SBI chief said, adding that the Abu Dhabi-based airline has not “conclusively” decided to exit the venture.

“There are certain conditions they want fulfilled and that is that the airline should be professionally managed and without interference,” Kumar said.

Etihad had earlier said that if it were to invest more money than the Jet’s founder Goyal must step down and take a less prominent role.

A senior finance ministry source, who was at the meeting, said that lenders to Jet are trying to revive the airline by changing the management, which includes Goyal.

Goyal agreed this month to step down as chairman and reduce his stake from 51 per cent, sources told Reuters, in order to secure a rescue deal for the airline he established 25 years ago.

Public bailout

India’s opposition Congress party earlier held a press conference during which its spokesman alleged that Modi’s ruling Bharatiya Janata Party (BJP) was using state-run banks like SBI to bail out a bankrupt, private airline.

This came a day after Reuters reported how the government is playing a crucial behind-the-scenes role to rescue Jet.

“On one hand, (the) Modi government is seeking to privatise Air India and on the other hand they are buying a bankrupt private airline with public money,” Randeep Singh Surjewala, a spokesman for the Congress party, said.

The government has urged state-run banks, led by SBI, to convert debt into equity and take a stake in Jet, which would however be “transitory”, in a rare move in India to use taxpayer money to save a struggling private sector firm.

Kumar, however, said that any decision taken to rescue Jet is a commercial one and is not at the direction of the Indian government. He was speaking after a meeting with officials from the prime minister’s office and finance and civil aviation ministries to discuss the rescue plan. — Reuters