The cash-strapped Jet Airways has been battling headwinds for a while now, ultimately defaulting on loan repayment despite delaying salaries and vendor payments in an attempt to service its debt on time.
The airline has been delaying salary payments to about 15% of its over 16,000 employees - including senior management, pilots and engineers - since last August.
Sources in the know told The Economic Times that the Directorate General of Civil Aviation (DGCA) in an audit of the carrier flagged off the withheld or delayed salary payments as a type 2 concern. The latter covers concerns that do not impact the safety of an airline directly but have the potential to do so.
The headline-grabbing September 2018 episode where 30 passengers on Jet's Mumbai-Jaipur flight were left bleeding after the crew forgot to turn on a switch that controls cabin air pressure springs to mind.
The audit findings have been shared with the Naresh Goyal-promoted airline but it is yet to send its response, the sources added. However, the airline has categorically denied this. "Jet Airways is not in receipt of any such reports as mentioned in your query and is therefore unable to comment," an airline spokesperson told the daily. "The company continues to run normal operations, as per schedule and with appropriate safety approvals as per the DGCA. The airline is current in terms of payments as per the disbursement schedule that has been shared with the specific employee group."
Last November, the loss-making carrier had promised pilots that salary dues would be paid by April. Much, however, depends on the resolution plan that gets finalised by its lenders. The SBI-led consortium has not yet agreed to a proposal to convert debt to equity in the airline. Moreover, the country's largest lender, which posted a loss of Rs 4,876 crore for the first quarter of this fiscal on the heels of an even more disappointing Q4 FY18, is unwilling to extend additional loans without covering their exposure with adequate collateral. It clearly does not want to risk a repeat of its fiasco with the now defunct Kingfisher Airlines.
According to ICRA, the airline's gross debt stood at Rs 8,411 crore as on September 30, 2018, up from Rs 8,403 crore at the end of the previous fiscal. "This is despite the receipt of lease incentives during June 2018 and advances from JPPL in October 2018. The debt levels are, however, expected to increase in the near term because of the ongoing stress on profitability, unless the company is successful in its liquidity initiatives," the ratings agency said in a recent note, adding that it also has large debt repayments totalling over Rs 6,312 crore due till FY21.
If the buzz is to be believed, a resolution plan seems to be in sight. Yesterday, shares of Jet Airways soared over 16% amid reports of likely finalisation of a resolution plan after the lenders' meet this week. Etihad Airways plans to increase its currently 24% stake in Jet, sources told Reuters, but that is conditional on Goyal diluting his stake.
With PTI inputs
Edited by Sushmita Agarwal