How Low-Cost Airlines, Jet Airways Started Losing its Sheen
Once considered the biggest Indian airlines in the world, Jet Airways is presently grappling for sustenance. Jet Airways, owned by Naresh Goyal, is a low-cost airline and is operating worldwide. The Indian carrier is renowned for owing a huge passenger market shares in the country, following the Gurugram-based airline, SpiceJet. However, the recent headwinds have dwindled the Indian aviation industry, in turn, affecting the low-cost operating airlines also.
At the closure of 2018, Indian airlines namely, Air India, Jet Airways and SpiceJet lost market share, even as the industry witnessed an overall number of passengers increased 19.2 per cent, between January and November, as reported by the Indian daily news, The Hindu.
Other airlines have emerged from the downtrend, though, Jet Airways failed to recover itself. As a result, the low-cost carrier, Jet Airways got debt-ridden, could not disburse salaries and ultimately, its operations got ceased. Following the years of success, financial threats are looming over Jet Airways now.
Over a year, the aviation industry is facing problems which, in turn, sinking the business of many carriers. Amid the Indian carriers, Jet Airways has been hit the hardest as the Indian carrier is debt-laden currently and owes INR 9,535 crore to the lenders, as reported by the Indian daily news, Money Control.
For guidance in finance-related problems, Jet Airways has approached SBI to render better solutions. To reduce liabilities of Jet Airways, SBI has emerged with new strategies such as bank-led provisional resolution plan (BLPRP) wherein lenders will hold shares, in lieu of debts. More so, a new board will be appointed to bring Jet Airways out of the debt, as reported by the Indian daily news, Money Control.
“Conversion of lenders’ debt into 11,40,00,000 shares of Rs 10 each by allotment of a such number of equity shares to the lenders that would result in the lenders becoming the largest shareholders in the company. Such allotment of 11,40,00,000 shares will be made at an aggregate consideration of Re 1 since, under the RBI circular, lenders can convert debt into equity at Re 1 when the book value per share of a company is negative,” Jet Airways told the Indian daily news, Business Today.
Goyal-owned Indian carrier, Jet Airways is enduring problems one after the other. Failing to pay out salaries to the employees, the workforce has stalled operations in various segments. Besides this, the airline has another major blow when Indian Oil Corporation (IOC) stopped giving fuel to Jet Airways’ planes. Later, the airlines ensured IOC to disburse payments shortly.
To come out of debts, Jet Airways has accepted SBI’s resolution plan, BLPRP and will sell its stakes on April 6. A large portion of the debt will be decremented through the proposed resolution plan.
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