Jet Airways shares plunged 7% on Friday in the wake of reports that the airline was facing an acute financial crunch that was prompting the promoters to mull a possible stake sale to fund operations. Jet’s shares lost ₹23.20 rupees to close at ₹308 on the BSE.
“There was the fear of the airline closing down,” said S.P. Tulsian, an invesment advisor. “People were apprehending a Kingfisher Airline like scenario,” he said.
Jet, which has been holding talks with employees including pilots to negotiate pay cuts and other cost reduction measures, termed media reports that the airline had working capital left only for the next 60 days as false and misleading.
‘Malicious reports’
“Jet Airways would like to clarify that recent media reports about the sustainability of the airline are not only factually incorrect, but also malicious,” CEO Vinay Dube said in a statement. “The airline would also like to deny any conjecture of a stake sale,” he added.
“The company is committed to create a growth-oriented, sustainable future and a revitalised experience armed with the addition of 225 B737-MAX fuel efficient aircraft, which will be inducted over the next decade,” Mr. Dube added.
In line with its stated focus on creating a healthier and more resilient business, Jet has been implementing several measures to reduce costs as well as realise higher revenues for desired business efficiencies, the CEO said. “Some of these areas include sales and distribution, payroll, maintenance and fleet simplification,” he said.
The airline has also been in dialogue with the employees to apprise them of the challenges being faced by the aviation sector in India and by the company in particular, to enlist their full support and cooperation for realising necessary savings across all business functions.
Employees said they had been asked to take a pay cut of 25%. While most employees are believed to have accepted the proposal, pilots have objected.
“A 25% pay cut is not acceptable,” said a pilot asking not to be named. “Then they must give us a stake in the airline in lieu of that.”
Mr. Dube said despite the high-growth environment, the aviation industry was currently passing through a tough phase given a depreciating rupee and the mismatch between high fuel prices and low fares. “We are confident that the various transformation initiatives identified and under implementation by the company will help in addressing the current issues faced by us and the industry,” he said.