NEW DELHI: The aviation regulator said on Thursday that it would ask Jet Airways for a “concrete and credible plan” to restart its operations, a day after the cash-strapped airline suspended all domestic and international flights following the denial of an emergency lifeline by its creditors, who now control the airline.
Jet Airways shares slumped 32.2% on the Bombay Stock Exchange to Rs 163.90 apiece at close of trading on Thursday, reflecting investors’ pessimism about the airline’s ability to survive under the weight of $1.2 billion in debt, notwithstanding a statement of hope by the airline’s banks and a pledge by the regulator to help the company. In comparison, the broader Sensex index fell 0.34% to 39,140.28 points.
The Directorate General of Civil Aviation (DGCA), the industry regulator, said in a statement that it would take “action following due procedure under relevant regulations” following Jet’s decision to halt operations.
It said in a statement: “DGCA would also be asking the company for concrete and credible revival plan to restart the suspended operations. DGCA would endeavour to do its best to help the company revive its operations within the set regulatory framework.”
The decision by Jet Airways, which operated more than 600 flights with a fleet of 119 planes at its peak, to suspend operations has thrown the future of 16,000 employees, many of whom haven’t been paid salaries for months, into uncertainty.
For passengers, the loss of seat capacity in the skies means higher fares in the peak summer season although the government is trying to avert a surge in ticket prices.
The crisis prompted state-owned Air India to offer special fares to Jet Airways passengers stranded at international stations. Civil aviation secretary Pradeep Singh Kharola said efforts were underway to minimise inconvenience to passengers.
Jet Airways has been feeling the heat for weeks after failing to receive a stop-gap loan of about $217 million from its lenders as part of a rescue deal finalised in late March, prompting lessors to repossess aircraft for non-payment of dues and forcing it to curtail flights.
A consortium of 16 lenders led by State Bank of India (SBI), the nation’s largest bank, is trying to find an investor to infuse funds into the airline launched in 1992 by Naresh Goyal, now 69, who turned entrepreneur after having worked at several international carriers.
On Thursday, SBI said in a statement: “The lenders after due deliberations decided that the best way forward for the survival of Jet Airways is to get the binding bids from potential investors who have expressed EOI [expressions of interest] and have been issued bid documents on 16th April. Lenders are reasonably hopeful that the bid process is likely to be successful in determining fair value of the enterprise in a transparent manner.”
The International Air Transport Association (IATA), a grouping of world airlines, suspended Jet’s membership of its clearing house system, a move that is likely to impact the process of refunding passengers. According to IATA, the system enables airlines and associated firms to settle their passenger, cargo and other miscellaneous billings in a way that reduces cost and risk.
“Consequently, claims by and against Jet Airways will not be processed by the clearing house with effect from and period 02 of the April 2019 clearing month,” the association said in a statement, adding that claims that had already been submitted for clearance were excluded.
On Tuesday, founder-chairman Goyal withdrew plans to bid for a controlling stake in the company, according to aviation consultant Mark Martin. Etihad Aviation Group purchased a 24% stake in the company in 2013.
“Finding new investors was always going to be a tall order for Jet Airways,” said Loizos Heracleous, an aviation expert at Warwick Business School in Britain. “Increases in industry profitability after 2011 were aided by lower fuel prices. With fuel prices on an upward trend since 2016, the performance of some airlines has taken a hit.”
Investors – according to Shukor Yusof, the head of aviation consultancy Endau Analytics – have doubts over whether a successful deal will be completed. Jet’s “value is dwindling with each passing day”, he said.
Jet’s last flight after it announced the suspension of operations on Wednesday night took off from Amritsar to Mumbai. With no emergency fund infusion in sight, the airline said it wouldn’t be able to pay for fuel or “other critical services to keep the operations going,” justifying the suspension.
The airline had been left with a mere seven aircraft earlier in the week.
Employees of Jet Airways staged a protest at Jantar Mantar in New Delhi, and gathered outside its Mumbai headquarters.
Zoya Shaikh, a 23-year-old Jet Airways airport agent in Mumbai, said she was still waiting for this month’s salary. “There is no clear idea of what is happening. We have been told by the airline management to wait for what the bidders plan to do,” she said.
Jet Airways pilots have complained that they haven’t been paid in four months. In New Delhi, hundreds of employees in uniforms – including flight attendants in the airline’s signature yellow – appealed for Prime Minister Narendra Modi to step in, some holding signs that read, “Save Jet Airways, save our family.”
“My kids are asking for medicine. Who do we go to and beg? If we don’t ask the government, who do we ask?” Rajender Kumar, a Jet Airways baggage handler, said.
Travel agents in New Delhi said Jet Airways’ grounding was affecting prices and availability of flights in and outside of India.
Jyoti Chopra of Sadhana Tours India said there were no seats available on any of the five daily direct flights from New Delhi to London Heathrow anytime in the next six days. One-way flights with one or more stops were selling for around 70,000 rupees ($1,006), about 43% higher than a week ago.
A round-trip flight from New Delhi to Thiruvananthapuram,the Kerala capital, would have cost about Rs. 14,000 but showed at Rs. 35,000 rupees on Thursday, Chopra said. A gap in capacity has pushed up fares by 30-40% since September in India, ratings agency ICRA has said.
The aviation regulator attempted to allay the concerns of passengers. “Our overriding priority remains the safety, convenience, and affordability of our aviation system. We are assisting airlines and airports to bring in capacity rapidly to ensure that fares remain stable and competitive,” the DGCA said in a tweet.
The crisis at Jet has opened a window of opportunity for other airlines, which are seeking extra slots at airports because of Jet’s suspension of flights. Jet’s slots will be allocated to other airlines based on factors including fleet and staff strength, a civil aviation ministry official said on condition of anonymity.
Once allotted, an airline can keep the slot for one flying season or six months and Jet can reclaim the slots if it is revived by the end of the flying season, the person said.
“We are assisting airlines and airports to bring in capacity rapidly to ensure that fares remain stable and competitive,” the ministry of civil aviation said on Wednesday.
IndiGo has been rapidly inducting new Airbus SE A320neos into its fleet in recent months. Air India wants to take 4-5 wide-body Boeing 777 aircraft of Jet Airways and may hold discussions on the subject with SBI, IANS reported. Low-cost airline SpiceJet has pledged to add 27 planes over the next two weeks, adding it would launch 24 new flights from Mumbai and Delhi over the period.
“The industry is currently facing severe shortage of capacity and SpiceJet remains committed to make all possible efforts to minimize passenger inconvenience,” said Ajay Singh, SpiceJet’s chairman and managing director.