Mayday!

A silver jubilee year for what was once the success story of Indian economic liberalisation drive has turned out to be a bleak one, as Jet Airways is buried under a mountain of debt and seeks relief from reluctant lenders. The Naresh Goyal-led airline had once set standards for superior service, but has suffered straight losses for the past 12 months. Even as the founder chairman seeks to palm off the losses on the macro-economic challenges — high fuel prices and a depreciating value of the rupee — that buffeted the aviation industry in the country, his own business decisions exacerbated the situation. Indeed, all Indian airlines lost money for some time, but others like SpiceJet and IndiGo, managed to recover soon. 

These low-cost airlines, it could well be argued, have contributed significantly to eroding the bottom line of the full-service airline, which Jet is, and surely Goyal would be ruing the day, 15 years ago, when he dismissed the challenges of the then newly-launched airlines. They prospered, and Jet needs nearly Rs 8,500 crore to meet its funding gap. This is not the first time that the airline has required a bailout, only this time it is more serious. Emergency meetings between government officials, banks and other lenders, as well as Etihad, which is offering to sell its 24 per cent stake in Jet Airways to the State Bank of India and is willing to take a significant haircut, all signal Jet’s precarious finances, as does the depletion of its fleet, and its failure to pay salaries to even key employees like pilots.

Naresh Goyal’s grip on the airline is unmistakable, but the stakeholders and lenders are not moving in to take control. The question of whether they will be able to bail out the cash-strapped airline remains. The banks and public institutions should ensure that they don’t throw good money after bad. The airline must be helped, but only after there is a clear plan leading to its recovery, and a strong management that can deliver. Seat-of-pants flying will not do any longer.