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Jet Airways lenders meeting today: Here's what happened so far

Jet Airways lenders meeting today: Here's what happened so far

Jet Airways lenders meeting today: Here's what happened so far
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By Nidhi Chugh  May 10, 2019 9:14:24 AM IST (Updated)

The fate of cash-strapped Jet Airways will be decided on Friday, as the lenders led by the State Bank of India (SBI) is set to finalise its winning bidder. 

The fate of cash-strapped Jet Airways will be decided on Friday, as the lenders led by the State Bank of India (SBI) is set to finalise its winning bidder. On April 17, the airline temporarily suspended its operations, leaving the future of around 20,000 staff uncertain after it failed to keep its aircraft afloat, find an investor, repay dues to lessors and furnish salaries to their employees.

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The SBI-led consortium of domestic lenders to Jet Airways has already sought bids for the ailing airline. The distressed airlines started suffering losses and could not pay the employees from last December.
How Did Jet Airline Fall In To Debt?
The entry of low-cost airlines such as IndiGo and SpiceJet in the mid-2000s triggered a price war in the fiercely competitive Indian aviation sector. In a bid to compete with IndiGo and SpiceJet, Jet Airways had offered tickets at a lower price. Spike in aviation turbine fuel (ATF) took a heavy toll on the airline as it failed to transfer fuel cost to the passengers owing to the competition.
Along with the rising ATF prices, provincial taxes of 30 percent also hurt the airline's financial health. The airline had also reported back-to-back quarterly losses citing a rise in ATF prices and competition.
Many aviation experts believe the start of Jet's financial troubles can be traced back to the 2006 purchase of Air Sahara for $500 million. Founder Naresh Goyal reportedly ignored the advice of professional associates who said he was paying too much. The budget carrier was rebranded "JetLite" but it haemorrhaged money and in 2015, Jet wrote off its entire investment.
What Is Happening Now?
Due to quarterly losses, Jet Airways delayed payment to a consortium of banks, led by SBI. Currently, the airline has a debt burden of more than Rs 8,000 crore.
In October 2018, the airline started curtailing operations and grounded 13 planes. And in April, Jet Airways had temporarily shut down its operations. The distressed airlines could not pay the employees from last December.
Jet had a fleet of around 120 aircraft but more than half have been deregistered and repossessed by lessors as the airline was unable to repay the dues.
The non-payment of the salary was among the first warning signals of the airline being in debt. After lots of negotiations and discussions, the employees had announced a strike and refused to fly after April 1. However,  the deadline had been delayed. And before it could imply again, the airline itself had shut its operations.
In October last year, Tata Group had carried out talks with Goyal for a possible investment in the airline. But talks failed after Tatas had reportedly asked for Goyal’s exit.
In a bid to solve the cash crunch Goyal had requested Etihad Airways, which already has a 24 percent stake in the airline, to buy a controlling stake in Jet Airways. However, the plan had failed.
The board of directors of the company had approved a plan on March 25 which envisaged infusing of Rs 1,500 crore over a period of time by SBI so that the company could be sold as a going concern but the promised funds were not disbursed.
On March 25, Goyal had stepped down from the board of the airline and ceded majority control to the SBI-led consortium.
The lenders invited expression of interest (EoI) for the airline and state-run National Investment and Infrastructure Fund Limited (NIIFL), UAE-based Etihad Airways, TPG Capital and Indigo Partners have sent in their EoIs and were in touch with SBI Caps, the firm mandated to carry out the sale on behalf of the banks' consortium.
A day before the deadline of submitting the bids, AdiGro Aviation, part of the London-based Adi Partners, submitted a binding bid to buy a stake in the grounded Jet Airways.
Last month, Adi Partners had submitted an EoI for Jet in a consortium with Goyal but was disqualified on April 12 due to concerns raised by other bidders, who had threatened to walk away if Goyal participated in the bidding process, sources had told CNBC-TV18.
A clutch of investors and lesser-known entrepreneurs have also claimed to have sent their bids for Jet.
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