19 March 2019: In a setback to Jet Airways revival plans, Gulf airline Etihad Airways has proposed the top lender of Jet Airways, State Bank of India (SBI), to buy its 24 per cent stake in the airline. This has come when there were reports that Etihad has conveyed to SBI that it won’t make any further investment in the troubled airline.
According to a ET Now news break, Etihad has offered its stake in Jet to SBI at Rs 150 per share or approx Rs 400 crore. This offer to SBI values Jet Airways at approx Rs 1,800 crore.
The development comes days after Jet’s lenders told Etihad it could exit if didn’t agree to conditions in the resolution plan. Key among the conditions was an immediate infusion of Rs 750 crore in Jet by Etihad, which the Gulf carrier didn’t agree to. Etihad’s owners, the royal family of Abu Dhabi, have been jittery for a while about the uncertainty in talks.
The development may mean the beginning of an endgame for Jet, which is facing its worst financial crisis in its 25-year-old existence. 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. In a filing to the BSE, the airline said it is late in a bond interest payment because of liquidity constraints.
Losing Etihad would mean Jet would have to look for a new partner which may mean another round of talks. Meanwhile, Jet which defaulted on loans in December has 15 days before it is liable to be referred to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code. To be sure, it has repaid some lenders and made its account current with them. But the airline, which has been constantly cancelling flights, will be weighed down by customer refunds.
Jet is said to have sent feelers to other potential investors including Etihad’s Doha-based rival Qatar Airways.
Etihad had in 2013 bought 24% stake in Jet for $379 million, giving the cashstrapped airline a fresh lease of life. This was part of Etihad’s strategy to invest in airlines and make them part of its global plan of aggressive growth in the global skies. The strategy proved to be costly and loss-inducing in several cases. Etihad has incurred a combined loss of close to $3 billion in 2017 and 2018.
Categories: General News