In the capitalist world, the grounding of Jet Airways would not have serious political implications as it has in our mixed economic system where the big business is free and yet constantly subject to myriad rules and regulations, even interference. In a truly free economy, the success or collapse of a business is essentially its own business. But not here. Yet, the crash-landing of India’s premier private sector airline amidst the election campaign raises its own problems.
After all, there are 23,000 jobs on stake. Even though Jet was the favourite airline of the Civil Aviation Ministry all through the UPA decade, having benefited from several special favours granted by the then minister Praful Patel, even though it had an equity partner in the deep-pocketed Etihad Airways which holds 24 per cent stake, its inability to raise emergency cash to keep it running indicates managerial failure and even insider conspiracy.
Its founder Naresh Goyal is not been scrupulous. When the trouble hit Jet, he disavowed responsibility and stepped aside. An honourable thing to do would have been to do his best, to stake his all in order to ensure that the airline he founded does not go under. When the talks for merger-acquisition started a few months ago with a reputed business house he sought to dictate terms, refusing to withdraw himself from the management.
Saddled with over Rs 13,000 crores in accumulated losses, including nearly Rs 8,000 in debt, the Airline may blame the rise of relatively low-cost rivals such as IndiGo and SpiceJet, but it cannot absolve itself of the blame for not heeding the early signals of trouble. Running 600 domestic and 380 international flights, it could well have got out of loss-making routes.
Blessed with lucrative West Asian routes by minister Patel as also virtual gift of prohibitively expensive slots at the Heathrow airport, Jet still messed up things. Nobody denies that the aviation business is cyclical- as the fugitive Vjiay Mallya knows full well at his cost- but a clever management knows to cut its coat according to its cloth.
When the aviation turbine fuel was ruling at $30-35 a barrel, Jet failed to consolidate its balance- sheet. Its mounting debt ought to have been a cause of worry for lenders as well. The consortium of lenders led by the State Bank of India is now running helter-skelter to salvage whatever it can. Yet, it too has failed to cough up, singly or jointly with other lenders, the minimum Rs 1,500 crore as interim fund to ensure that the airline is up and running again.
Chances of Jet finding a buyer when it is operational, naturally, are greater than when it is grounded and the lenders repossess planes and other equipment. Meanwhile, it was sheer hubris that Jet acquired the sinking Air Sahara from an equally controversial operator Subrata Roy, in 2007, which, it claimed, led to it bleeding further.
Thus far, the Civil Aviation ministry has watched the Jet downfall from a distance, facilitating negotiations between various lenders and the airline, and giving a helping hand to the troubled Jet to find a viable investor. Etihad showed interest but then went cold, probably hoping to acquire further stake at a bargain basement price. Of course, lenders cannot be blamed for being extremely careful for even the interim funding can go down the drain if there is no revival of Jet.
Merging it with one of the more successful private airlines, of course, no question of that did Air India acquiring it with government money may be the only answer to its woes. Thousands of Jet employees not only fear joblessness but, worse, they haven’t been paid for months.
This alone can pressure the authorities to come to its rescue, but how? Not by throwing more good money at Jet. Meanwhile, ordinary passengers are beginning to pay for the fall of Jet. Other airlines have raised fares, there is a scramble for confirmed bookings.
Finding a credible bidder for Jet might involve relaxing some of the stringent investment red-lines in the aviation sector. The dilemma of the government is acute. It has to balance the need to save 23,000 jobs against the recovery of money by lenders. Hopefully, it will steer clear of a populist approach which might bleed the banks further without ensuring that Jet is back flying. It is a tough call.
But in the election season with the model code of conduct operational any decision must satisfy the demands of equity and fair play without rendering 23,000 employees jobless. Meanwhile, it will serve the cause of justice if there is a proper inquiry whether promoter Naresh Goyal has got away making millions from the failed Jet before leaving it in the lurch.
