Jet Airways, the airline which suspended its operations on Wednesday, had sent out the first SOS about its poor financial health to the government in November, asking it of "urgent support." In a letter written to the government, the airline had sought its intervention for extended credit terms from oil companies and airport operators, which would have given the airline cash flow support to the tune of around Rs 700 crore on a monthly basis.
The letter was sent to the union minister for civil aviation Suresh Prabhu, the minister of state for civil aviation Jayant Sinha and the then civil aviation secretary Rajiv Nayan Choubey.
Copies of the letter were also sent to the Prime Minister's Office and the ministry of finance. CNBC-TV18 has reviewed a copy of the letter.
"Currently oil companies are extending credit up to 90 days against bank guarantees. At present, all our credit lines are fully utilised and with increased traffic flows, we are finding it extremely difficult to meet our increasing fuel needs. Accordingly, we seek your kind support in having the credit terms extended to 6 months (i.e additional 3 months) without requiring any additional collateral. This arrangement can be reviewed once again by the respective oil companies in April 2019. This support will give us cash flow support of Rs 2000 crore against an annual oil bill of Rs 10,000 crore (our domestic bill alone is Rs 7,560 crore)," Jet Airways had pleaded in the letter written to the government.
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"Further, currently all airport operators (both AAI and the private airports) have been extending 15 days credit against bank guarantees. The operators are seeking bank guarantees equivalent to 2 months operation. Given our current situation, we have been able to provide them bank guarantees equivalent to only one month's operations. Here too, we seek your intervention in enabling us to have 3 months credit terms without requiring any additional bank guarantee support. This will give us a monthly cash flow reprieve of Rs 600 crore. The arrangement can also be revoweed in April 2019," the letter from the Mumbai-based carrier had said.
The airline also stressed on the fact that the sector in itself was experiencing an extremely difficult phase, given the excessive rise in the price of aviation turbine fuel, high taxes on ATF, rupee depreciation and low yields.
"The resulting mismatch between cost and revenue have adversely impacted our cash flows. We have also posted significant losses over the last three quarters after posting profits for the preceding eight quarters," the airline said.
Desperate for immediate help and anticipating the worst outcome with 16,000 jobs at stake and lakhs of passengers in bookings, the airline also reminded the ministry of the support that it had provided to another domestic carrier, SpiceJet, in its time of need.
"The ministry has always been gracious in supporting airlines during difficult times. It may be recalled that a few years ago, the ministry had extended its kind support to another Indian carrier, helping it overcome a crisis at that point in time. The government's initiative helped build confidence across the entire aviation sector. The ministry's assistance also ensured that thousands of jobs in the sectpr remained protected," Jet Airways wrote.
Confident that there is interest in the airline's brand, Jet Airways also told the government that it was in active discussions with various potential investors with respect to the proposed monetisation of assets and capital infusion and was also simultaneously evaluating sale and subsequent lease back agreements of some owned fleet, for short term liquidity.
"However, for the reasons cited above, which have impacted our cash flows, we seek your urgent support by way of certain provisions that will help us in overcoming these challenging times," the airline said.
"We once again request the ministry to extend the support by opening up the external commercial borrowing provision to airlines to raise funds for working capital as well. This may be linked to an airline's ability to earn foreign exchange for the nation," Jet Airways appealed to the government.This was the first of the many letters that the airline sent to the government apprising them of the impending crisis at hand. However, a hands-off approach witnessed the fleet from 119 aircraft in February to 35 in March to none on April 17. Queries to the civil aviation ministry and Jet Airways remained unanswered till the publication of the copy.