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Rick Schlamp
However, Jet Airways (JA) is now having hard times. As the dozens of budget airlines entered the market several years ago, companies with a full service cycle, including Jet, had to drastically reduce prices. The situation was additionally worsened by 30 percent taxes on jet fuel in the states. Passengers also played their part in the troubles of the last months. In India, consumers prefer to save and use free services whenever possible. Unlike low-cost airline operators, a full-service airline like JA offers most services for free.
As a result, Jet Airways has been suffering losses 9 of the last 11 years. As of February 1, 2019, its total debt amounted to 72.99 billion rupees ($ 1 billion). It was necessary to default on payments due on December 31, 2018, and stop paying employees and pay off landlords.
In order to be in the black, the airline needs about 85 billion rupees. A group of JA creditors led by State Bank of India offered to buy a 50.1% stake in the airline for 1 rupee and issue 114 million new shares. In addition to issuing new shares, it is planned to restructure debts, as well as sell airliners and then rent them.
Jet Airways negotiated with Etihad and the Indian conglomerate of the Tata Group. Among the other creditors is the famous businessman Naresh Goyal, who is willing to invest in the airline 7 billion rupees in exchange for a 25% stake. Etihad can invest approx. 14 billion rupees. The National Investment and Infrastructure Fund is ready to contribute about the same amount - 13 billion.
The inevitable question - why so much attention is paid to saving a private company - has a simple answer. Soon, there will be a nationwide election in India. This means that Prime Minister Narendra Modi, who is in for a tough fight, does not need to bankrupt the airline, which employs 23,000 people. Loud bankruptcy can damage his image as a business supporter and show that instead of fulfilling election promises to create new jobs, he will lose them (jobs).
In addition, disappearance of Jet Airways, headquartered is in Mumbai, is likely to raise ticket prices, since it has 37 routes in the country. The federal government emphasized importance of the situation by seeking help from the Tata Group.
JA means a lot to Etihad. Things are not going well in the aviation industry of Abu Dhabi, either. Over the past two years, the company has lost almost $ 3.5 billion and is now forced to close routes, cut thousands of employees and abandon expensive expansion. Etihad refused to buy new Boeings and Airbuses for a total of $ 21.4 billion. Healthy JA is very important and necessary for Etihad.
Economists, meanwhile, note that the situation in the Indian air transport sector is difficult. Airlines mainly suffer losses, and bankruptcy are not uncommon. Suffice it to recall Kingfisher Airlines, which went bankrupt in 2012. Two years later, SpiceJet Ltd. almost disappeared. State airline Air India Ltd. was kept afloat solely by billions of subsidies and government loans. Indian Airlines Singapore Airlines Ltd. and AirAsia Bhd bear large losses and bought the same way as Etihad. The only exception is IndiGo, which manages to keep afloat thanks to a very tough economy.
source: gulfnews.com
As a result, Jet Airways has been suffering losses 9 of the last 11 years. As of February 1, 2019, its total debt amounted to 72.99 billion rupees ($ 1 billion). It was necessary to default on payments due on December 31, 2018, and stop paying employees and pay off landlords.
In order to be in the black, the airline needs about 85 billion rupees. A group of JA creditors led by State Bank of India offered to buy a 50.1% stake in the airline for 1 rupee and issue 114 million new shares. In addition to issuing new shares, it is planned to restructure debts, as well as sell airliners and then rent them.
Jet Airways negotiated with Etihad and the Indian conglomerate of the Tata Group. Among the other creditors is the famous businessman Naresh Goyal, who is willing to invest in the airline 7 billion rupees in exchange for a 25% stake. Etihad can invest approx. 14 billion rupees. The National Investment and Infrastructure Fund is ready to contribute about the same amount - 13 billion.
The inevitable question - why so much attention is paid to saving a private company - has a simple answer. Soon, there will be a nationwide election in India. This means that Prime Minister Narendra Modi, who is in for a tough fight, does not need to bankrupt the airline, which employs 23,000 people. Loud bankruptcy can damage his image as a business supporter and show that instead of fulfilling election promises to create new jobs, he will lose them (jobs).
In addition, disappearance of Jet Airways, headquartered is in Mumbai, is likely to raise ticket prices, since it has 37 routes in the country. The federal government emphasized importance of the situation by seeking help from the Tata Group.
JA means a lot to Etihad. Things are not going well in the aviation industry of Abu Dhabi, either. Over the past two years, the company has lost almost $ 3.5 billion and is now forced to close routes, cut thousands of employees and abandon expensive expansion. Etihad refused to buy new Boeings and Airbuses for a total of $ 21.4 billion. Healthy JA is very important and necessary for Etihad.
Economists, meanwhile, note that the situation in the Indian air transport sector is difficult. Airlines mainly suffer losses, and bankruptcy are not uncommon. Suffice it to recall Kingfisher Airlines, which went bankrupt in 2012. Two years later, SpiceJet Ltd. almost disappeared. State airline Air India Ltd. was kept afloat solely by billions of subsidies and government loans. Indian Airlines Singapore Airlines Ltd. and AirAsia Bhd bear large losses and bought the same way as Etihad. The only exception is IndiGo, which manages to keep afloat thanks to a very tough economy.
source: gulfnews.com
