Rescue deal no panacea for Jet

New Delhi, March 29

Jet Airways’ investors are cheering this week’s government-led rescue deal, but the cash-strapped Indian airline’s future looks mired in uncertainty as convincing a new investor to come on Board may not be easy.

The airline, which was on the brink of bankruptcy, was bailed out on Monday by state-run banks, which have temporarily taken a majority stake in the company, given it a new loan of $218 million and forced its chairman, Naresh Goyal, to step down from the Board of the airline he founded 25 years ago.

Jet shares have rallied 20% since news of the rescue on hopes that the airline would now be able to clear salaries, redeploy grounded planes and claw back market share.

Its future is far from certain though, as a consortium of banks led by SBI now rushes to find a new investor and sell its stake in the airline.

This may not be easy especially with Goyal still holding a 25.5% share in Jet, which gives him the legal right to block key decisions, including raising capital, issuing new shares and diluting equity.

If a deep-pocketed investor is not found soon, Jet may struggle for funds again as the interim loan given by the banks will not last for very long, say lessors and analysts.

“Right now Jet is in survival mode, there is no strategy,” said an executive at one of Jet’s lessors. Jet has been in talks with the lessor since securing the deal but it has given few details on settling pending lease payments and on its turnaround plans, he said. — Reuters