Just around midnight on the 16th of April Jet announced temporary suspension of all its flights. That was a euphemism for a shutdown in operations due to paucity of funds with the airline. When the airline sent an SOS for an infusion of Rs.1000 crore and the bankers refused, it was clear that Jet Airways would have no option but to shut down.
How not to sell an airline
How did Jet come to this pass? An ex airline official once said that at a point it just becomes so unprofitable to run an airline that the returns can never match up to the risk of flying. When you reach that point, most promoters will just leave the airlines to die a natural death. That appears to be the case with Jet also. When SBI had taken a majority stake in the business, they should have realized that funding the operations till the closure of the deal was its job. By refusing a line of credit to Jet at this point of time, it has acted more like a banker than an airline CEO. The problem is that when you own more than 50% of the shares of a company, you got to think like the CEO of that company. By refusing to give Jet the funding support, SBI has virtually paved the way for the eventual liquidation of the airline. That may not happen right away but eventually there will be little choice. This may not be the end but it is surely the beginning of the end of Jet Airways as we know it. Let us understand why it is so?
Piecemeal sale will not work
The SBI approach seems to be to keep all its options open. While SBI is looking to find a global investor to buy the Jet stake, it is also simultaneously trying to evaluate what it can recover through a piecemeal sale of Jet Airways. For example, the bank is also negotiating with other Indian airlines to take over the fleet of Jet Airways. Already, other airlines have expressed interest in the landing rights and parking slots of Jet Airways. The only question is that if all these assets are sold, then what is left of Jet Airways. Actually, nothing will be left. Already most of the employees of Jet have started shifting to other airlines and in another month or so Jet would be incapable of flying even if other problems are resolved. It is hard to fathom if SBI did not think about these consequences or whether they deliberately allowed Jet to fold up.
Endgame for Jet
At this point, it is estimated that banks may get around 20% of their loans and operational creditors will get nothing. That was always the dilemma. Jet had no real assets so they could not go to NCLT and outside of NCLT; it was always going to be a case of fleeting assets vanishing overnight. SBI would have done better to negotiate a deal with Goyal and let Jet fly. Now it clearly looks like the beginning of the end for Jet. It is just that nobody cares! ©