Objection against lenders’ move to part-own ailing airline
CHENNAI: The All India Bank Employees’ Association (AIBEA) has red-flagged against the move by public sector banks to part-own cash-strapped companies like Jet Airways, the once most-sought-after private sector airline in the country.
The objection has been raised by the bank employees’ union in the wake of the news that the State Bank of India (SBI), the country’s largest lender, was planning to take over 15 per cent ownership in the troubled airline if it gets the green signal to convert portion of its loans into equity as part of the restructuring package of the ailing airline.
In reaction to this development, CH Venkatachalam, General Secretary of AIBEA, made his union’s stand amply clear stating that “banks should not become the owner of the ailing Jet Airways.”
Noting that running the airline is only the business of that company and its management, he said that whatsoever loans Jet Airways has availed from banks, it’s the sole responsibility of the company to settle it, and it should not swap ownership share for loan dues.
“It is reported that the shares of Jet Airways are sought to be dumped on the shoulders of the banks. Even Etihad Airlines, the Abu Dhabi-based partner of the ailing Indian airline, wants its shares to be purchased by our banks,” Venkatachalam resented.
He expressed surprise at the reported statement made by the SBI chairman, Rajnish Kumar discernibly sympathizing with the airline despite being a defaulter.
SBI Chairman Rajneesh Kumar is reported to have stated, “It’s in ‘everybody’s interest’ to keep the airline flying. …… Our aim is that the corporate debtor (Jet Airways) should not be harmed.”
Venkatachalam has stated that the union disagrees with such proposals, and the attempts of banks to purchase the shares of this ailing airline with a view to saving the company at the cost of public money is highly deplorable.
It’s worth remembering that the private airlines were allowed to operate in India on the premise that private operators would be much more efficient than public sector airlines.
“And because of this open encouragement extended to the private sector, India’s public sector operators (Air India and the erstwhile Indian Airlines) came a cropper. Government should review their policy of weakening public sector,” the AIBEA chief stressed.
One should realize that when Jet Airways was reaping income year after year, the profits went to the pockets of the owners. “And now, when the same airline has started struggling with no signs of light at the end of the tunnel, why public money and banks’ money should be used to bail them out?”
The Abu Dhabi airline has reportedly sought Rs400 crore for its 24 per cent stake in Jet Airways valuing the airline at Rs150 a share. There were reports that Etihad, which was willing to exit the airline even at a discount, was keen to sell its 50.1 per cent stake in Jet Privilege to SBI and to the lenders. Etihad is also said to have proposed to SBI to become guarantor for the $140 million loans taken by Jet from HSBC.
The market fears that Jet is likely to default on forthcoming installments of loans even as grounding of more aircraft continues due to the non-payment of lease payments. More painfully, the dues to its own employees are also slowly mounting leaving the airline an immutable case of financial disaster.
The Jet Airways has incurred a loss of Rs3208 crore during the nine months ended December 31, 2018 and has a negative net worth of Rs10,370.24 crore as at that date.
During the quarter ended December 31, 2018, the company has defaulted in repaying the working capital loan installments, including interest due to Indian banks, which has partly been paid in January 2019, and there are substantial payments overdue to creditors.