As the crisis in Jet Airways worsened with more number of flights being cancelled, the civil aviation minister Suresh Prabhu has asked the secretary of the ministry to look into the matter and submit a report at the earliest. The minister said that the secretary is to hold an emergency meeting on the grounding of flights by Jet Airways, and Advance bookings, Cancellation, Refunds and Safety issues of the airlines. The secretary will also have to get a report on compliance issues from Directorate General of Civil Aviation.
Directed Secretary, @MoCA_GoI to hold an emergency meeting on grounding of flights by Jet Airways, Advance bookings, Cancellation, Refunds and Safety issues, if any. Asked him to get a report on Jet compliance issues immediately from DGCA. @jayantsinha
— Chowkidar Suresh Prabhu (@sureshpprabhu) March 19, 2019
Jet Airways is facing huge financial crisis, which has resulted in it being unable to pay rental for leased aircraft and interest on finances. Due to non-payment of lease rentals, leases have grounded dozens of aircraft operated by the airlines, resulting in the cancellation of flights. According to reports, total number of grounded aircraft has reached around 60, which is approximately half of the fleet size of 119 planes.
Other than non-payment to creditors, the airline is also facing trouble in paying salaries, and they have not paid salaries to their maintenance staff for three months. In a letter written to DGCA yesterday, Jet Aircraft Engineers Welfare Association said that 3 month’s salary is overdue to them, and also said that the flight safety is at risk. The letter said, “it has been arduous for us to meet our financial requirements, result of which have adversely affected the psychological condition of Aircraft Engineers at work and therefore the safety of public transport airplanes being flown by Jet Airways across India and the world is at risk.” The requested the government to step in ask the airline to pay the dues.
Etihad Airways, which owns 24% in Jet, was to infuse capital into the airlines to solves its financial crisis, but the talks are stalled over several disagreements. Etihad has not agreed to a debt resolution plan proposed by lenders of Jet Airways, led by State Bank of India. According to the proposal, the consortium of lenders, will convert its loans into shares and pump in an additional ₹1,000 crore to raise its stake to 29.5%. On the other hand, Etihad was also expected to infuse between ₹1,600 crore and ₹1,900 crore to raise its shareholding to 24.9%.
Another contentious issue is the perpetuity requirement included in the proposal. The proposal seeks to limit promoter shareholding 22%, but Naresh Goyal is asking it to be dropped. Etihad is also not agreeing to proposal to add two nominee directors from promoter group.
Jet Airways has already defaulted in paying loans and it has informed that it will default in making more payments which are due this month. The Airline has a debt of more than 8400 Rs crore, which continues to rise as interest gets added to that.
In such a scenario, maintenance and safety of the planes can be an issue and that’s why the ministry has stepped in. Despite flight cancellations, the airline has continued to offer discounts and accept advance bookings, which may be looked into by the ministry, and may ask the airline to stop them.