Jet Airways crisis: Jet Airways top management team of CEO, CFO resigns
The grounding of Jet’s operations has put the future of over 20,000 employees at stake who were left with no work at hand. Besides facing heavy losses in the stock market, Jet also faces the challenge of passenger refunds of thousands of crores, dues to vendors and over Rs 8,500 crore bank debt.
Rupali PruthiMay 15, 2019 17:54 IST
Story 1: Jet Airways crisis: Jet Airways top management team of CEO, CFO resigns
Vinay Dube, the Chief Executive Officer (CEO) of Jet Airways, resigned from his post with immediate effect on May 14, 2019 citing personal reasons. Dube had joined the airline in August 2017 after serving varied roles at Delta Airlines, Sabre, and American Airlines..
Dube's resignations came just hours after the resignation of airline's Deputy CEO and Chief Financial Officer (CFO) Amit Agarwal.
The airline's Chief People Officer Rahul Taneja and Company Secretary and Compliance Officer Kuldeep Sharma also resigned from their posts. Earlier in May 2019 itself, Jet Airways accepted the resignation of its whole-time Director Gaurang Shetty.
Grounding of Jet Airways' flights
Cash-strapped Jet Airways on April 17, 2019 suspended all its domestic and international flights indefinitely with immediate effect after the lenders refused to release emergency funds for the carrier.
Once India’s top airlines, Jet Airways flew its last flight on Amritsar-Mumbai-Delhi route at 10:30 pm on April 17 after flying for 25 years.
Uncertainty over fate of employees, passengers, suppliers, pilots
The grounding of Jet’s operations has put the future of over 20,000 employees at stake who were left with no work at hand.
Besides facing heavy losses in the stock market, Jet also faces the challenge of passenger refunds of thousands of crores, dues to vendors and over Rs 8,500 crore bank debt.
Jet Airways also owes to lessors, suppliers, pilots and oil companies.
Once a premier airline, now a troubled carrier
Jet Airways started its operations on May 5, 1993 with its maiden flight 9W321 plying between Mumbai and Ahmedabad. During its peak days, Jet operated over 120 planes and over 600 daily flights. The carrier operated on 380 international routes including flights to London, Amsterdam and Paris.
However lately, the airline was forced to cancel hundreds of flights and to halt all flights to overseas destinations.
Jet first went into financial crisis in 2010 wherein four back-to-back quarterly losses forced the company into defaulting on payments to banks, lessors, employees. However, it managed to clear off the dues with infusion of funds from the lenders.
The recent crisis, which began in March 2018 with delayed salary payments and 25 percent paycut for top management, has eventually led to the shutdown of the carrier itself.
Parallels between Jet Airways & Kingfisher Airlines
The fall of Jet corresponds that to the fall of Kingfisher Airlines which was shutdown in 2012, costing thousands of jobs and breeding losses to lenders and lessors.
Kingfisher Airlines was also first grounded temporarily when the aviation regulator, Directorate General of Civil Aviation suspended its flying licence, but the airline could never flew again.
Jet Airways: A defaulter
Indian full-service carrier Jet Airways on January 1, 2019 informed the stock exchanges that it had defaulted on its loan repayments to banks. Soaked in financial losses and debt of over USD 1 billion, the airline is struggling to even pay out salaries to employees. It defaulted in making payments to banks, suppliers, lessors and pilots.
Resultantly, Jet Airways Founder and Chairman Naresh Goyal and his wife Anita Goyal were forced to resign from the board in March 2019. Post this, the Bank Led Interim Resolution Plan (BLIRP) came into effect for the revival of the airline.
Action by Lenders
The lenders consortium invoked the entire 51 percent stake of Naresh Goyal in the airline, and are lookng for a new buyer.
Note: Once a company announces its failure to make payments, lenders are given a total of 180 days from the first day of default to implement a resolution plan for large stressed accounts. If lenders fail to implement the resolution plan, they then refer the firm for insolvency proceedings.
Why ‘Insolvency’ route won’t be easy for Jet Airways?
Though lenders may advice insolvency route, however, it will not be easy for Jet Airways having no prospect of any obvious investor.
On the other hand, if due to non-payment of dues and salaries, lease agreements for planes are cancelled and the employees move to other organisations, the recoveries might be low. Lenders may not find any tangible assets of to attract new buyers under the Insolvency and Bankruptcy Code (IBC), 2016.
This situation will leave the lenders with the only option to operate the airlines themselves for some time and look for a suitable buyer thereafter.
What led to financial crisis at Jet Airways?
Increasing cost of aviation fuel
The airlines operate on the Aviation Turbine Fuel (ATF), the price of which is determined by global players. The increasing cost of the fuel took a heavy toll on Indian airlines, especially on Jet Airways as it operates on international routes as well.
However, the increase in fuel cost could not be dealt with by increasing the cost of passenger tickets due to low-cost model of the planes.
The low-cost model of Jet Airways’ planes is one of the biggest factors behind rising operational costs of the airline. Though the airline undertook various measures to cover-up the same by offering heavy discounts on flight tickets, it only contributed to increasing costs and losses at the same time.
Decline in operations
Due to the increasing financial losses and inability to pay for fuel and services, Jet Airways had to cancel over 40 flights a week in nine Gulf country routes, thus, leading to reduced flight operations that directly hamper the airline reputation and prominence.
Story 2: Indian Navy launches 'Virtual Reality Centre' to boost warship design capabilities
Admiral Sunil Lanba, the Chief of the Naval Staff, on April 12, 2019 inaugurated the state-of-the-art Virtual Reality Centre (VRC) at the Directorate of Naval Design (Surface Ship Group).
From conceptualisation of design to execution of the project, everything was managed by the Directorate of Naval Design.
This centre is expected to provide major boost to the indigenous warship design capabilities of Indian Navy. It will provide impetus to self-reliance.
This project will facilitate joint design reviews for continuous interaction between the designers and the end users to improve design and ergonomics onboard warships.
It will boost the warship construction under the “Make in India” initiative of the Union Government.
Directorate of Naval Design (Surface Ship Group)
The Directorate of Naval Design (Surface Ship Group) was instituted in 1960s and since then has made major contributions towards indigenous warship design capabilities of the Indian Navy, thus, improving self-reliance for warship design and construction.
The organisation has successfully developed 19 warship designs on which more than 90 platforms have been constructed till date.