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Emergency funding for Jet Airways put on hold until further clarity

By Parnika Sokhi

Parnika Sokhi Moneycontrol News

Lenders to Jet Airways have hit brakes on the Rs 1500 crore emergency funding that was earlier agreed upon, as hopes of keeping the troubled airline operational are dwindling by the day.

The decision to pump in additional funding would also depend on the interest of potential buyers. Also, not all lenders were in favor of pouring in more cash when the debt resolution plan was firmed up in the first place.

The airline, founded by erstwhile promoter Naresh Goyal, has been grounding more and more planes every week raising concerns on it's eligibility to keep functioning as per aviation norms.

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The operational fleet of Jet Airways is now down to just 26, from 119 earlier. In the latest round on April 2, the airline grounded 15 planes due to lease rental defaults.

Bankers are concerned if the airline can maintain the current fleet to stay operational until new investors are found. "If they can maintain the current fleet, so that they don't go below 20 then there will be some clarity, otherwise this money is also sunk. No lender would like to take the risk unless there is some clarity," a senior state-run bank official said.

The State Bank of India (SBI)-led consortium, on April 6, has invited Expression of Interest (EoI) from prospective parties for acquiring a majority shareholding in the debt-burdened airline. The window for submission closes on April 9, lenders said in a joint statement that also indicated recourse to "other options" if the stake sale did not meet their expectations.

According to sources, the government-backed National Investment and Infrastructure Fund (NIIF), private equity firms TPG and Indigo Partners are likely to make a joint EoI. Also, renewed interest from Etihad Airways has ignited the lenders' hopes for it's participation as well. The Jet's current foreign and second largest investor had decided to exit the airline earlier. However, Goyal agreeing to give up his control could have resulted in change of Etihad's interests.

On March 6, Eithad's CEO Tony Douglas said in an interview that it did not wish to continue with its equity alliance strategy going ahead. "Being a shareholder, often without full control, but providing financial and human resource assistance in an environment where you cannot derive fair and reasonable benefit, simply does not work," he said in an interview to industry association IATA.