If Etihad backs out, Jet Airways would have to look for a new partner in a fortnight
Etihad Airways is said to have informed Jet Airways' top lender State Bank of India that it won't make any further investment in the airline. The airline may not even be part of the fundraising deal drawn up by the consortium of lenders, according to a report by The Economic Times.
Etihad, which owns 24 percent of Jet Airways, may also eventually look at an exit, sources told the newspaper. According to the report, Etihad's CEO Tony Douglas conveyed this decision to SBI chief Rajnish Kumar in a meeting on March 18.
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Amid grounding of operations at various domestic and international airports, Jet Airways Chairman Naresh Goyal and his son Nivaan Goyal flew to Doha and gave a presentation to Qatar Airways Global CEO Akbar Al Baker, as per the report. A senior executive at Qatar, however, told the newspaper it was not interested in investing in Jet Airways.
Moneycontrol independently could not verify the report.
Earlier, Jet Airways' lenders told Etihad it could exit if it didn't agree to conditions in the resolution plan. Key conditions include an immediate infusion of Rs 750 crore for the cash-strapped by Etihad, which the Gulf carrier didn't agree to. Meanwhile, Etihad's conditions weren't met by the lenders and Jet Airways.
The Middle East airline continues to stick to its demands, including capping of Goyal's stake at 22 percent and exemption from opting for an open offer in case it decides to invest further in the Indian airline, thus increasing its stake.
In the absence of a strategic investor, lenders on their own may be unable to turn around Jet Airways. The development could make the revival prospects of the beleaguered airline bleak.
Read: Naresh Goyal pens new letter to employees, asks for “further short time”
According to the draft memorandum of understanding (MoU), the lenders are supposed to convert debt into 114 million shares. The airline has already enhanced its share capital and will, in the next step, issue fresh shares via a rights issue.
As per the provisional pact, a 'new investor' was to inject between Rs 1,600 crore to Rs 1,900 crore for about 20 percent in Jet Airways and the Goyal-led promoter group's stake was to fall to 17.1 percent, with a caveat seeking to cap it at 22 percent.
Jet Airways is facing the worst financial crisis in its 25-year old existence. As a result of liquidity constraints, the airline has defaulted on loan repayments, grounded a majority of its planes, delayed payments to most vendors, including aircraft leasing companies and delayed salaries.
Read: Jet Airways grounds 4 more aircraft; about 60 now taken off service
If Etihad backs out, Jet Airways would have to look for a new partner in a fortnight. The Indian airline, which defaulted on loans in December, has 15 days before it is liable to be referred via a case to the National Company Law Tribunal (NCLT) under the Insolvency & Bankruptcy Code (IBC).
The Reserve Bank of India (RBI) regulations state that lenders must find a resolution to cases pertaining to defaulting companies within 180 days of their first default. If the case remains unresolved, the company has to be referred to a bankruptcy court.
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Increasing flight cancellations at Jet Airways have also prompted Air Passengers Association of India (APAI) to demand that the airline be barred from any advance bookings. Refunding disgruntled customers would worsen the airline's cash position.
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