Jet Airways India’s lenders invited initial bids to buy as much as 75 per cent of the debt-laden carrier, starting a process that will determine the future of India’s oldest surviving private airline.
Potential buyers must submit their interest by April 10, State Bank of India, the lead creditor, said on Monday. A strategic bidder should have a net worth of at least 10 billion rupees (Dh528.8 million) in the preceding financial year, or at least three years of experience in the airline business.
The airline is credited with successfully breaking the monopoly of state-run Air India and was once India’s second-biggest carrier, but its fleet has dwindled to 26 planes from 124 as recently as January. Accumulated losses in nine of the past 11 years have caused Jet Airways to delay payments to banks, lessors and employees, while its founder Naresh Goyal was forced to cede control of the carrier, according to Bloomberg.
Shares of Jet Airways rose 3.2 per cent to 264.25 rupees at the close in Mumbai on Monday, narrowing this year’s losses to less than 5 per cent. The stock dropped 67 per cent last year.
Jet Airways needs 85bn rupees to get back on its feet after a fare war by budget airlines wiped out profits and it racked up debt of more than $1bn.
The fate of Jet Airways is crucial to the legacy of Indian Prime Minister Narendra Modi as he faces an election that begins April 11 after holding power for the last five years. While he remains the favourite in the polls, his party has faced setbacks of late and he has been criticised for not living up to a key election promise to create 10 million new jobs a year. A collapse of Jet Airways, with 23,000 employees, could further dent his credentials.
Consortiums submitting bids should have no more than three members, with each holding a share of no less than 15 per cent, according to Monday’s document.
After qualified bidders are selected, they will be provided access to the company’s data and the bid document.
Lenders led by State Bank of India said last week that “other options” may be considered if efforts for the stake sale “don’t produce the desired result”, without elaborating on what the options could entail.
The bank group had agreed to take a 50.1 per cent stake at an effective cost of 1 rupee through the issuance of 114 million new shares in an attempt to bail out the carrier. It was a manoeuvre that was allowed under a framework outlined by the Reserve Bank of India last year for companies with a negative net worth as a temporary measure. However, a surprise ruling by India’s top court last week squashed that framework and raised questions once again about the airline’s future.
It’s unclear what happened to as much as 15bn rupees of immediate funding that banks said last month they would provide the carrier. Earlier, the Indian government was said to be looking into options to save jobs at Jet Airways, including by asking other airlines such as low-cost operator SpiceJet to consider taking over some aircraft, according to sources.
The latest move comes after India's largest commercial oil company briefly stopped supplying fuel to Jet Airways on Friday.
The Indian Oil Corporation (IOC) halted supplies to the debt-addled airline at noon on Friday for not meeting payments, an IOC spokesperson told AFP.
"If there is some payment made by Jet, we will resume our refuelling services," they said.
Later the spokesperson said that deliveries had resumed, but declined to comment on whether Jet had made any payments.
