The government is working on plans to help the Naresh Goyal-led Jet Airways stay afloat through a management change.
"Banks are trying to work out a way to revive Jet Airways through a change in management," said a top official on condition of anonymity.
Banks are also trying to revive the airline to protect the interests of consumers and creditors, the official said.
Aviation Secretary Pradeep Kharola, State Bank of India (SBI) Chairman Rajnish Kumar and Principal Secretary in the Prime Minister's Office Nripendra Misra attended a meeting with Finance Minister Arun Jaitley to take a stock of the situation.
"The government has given us no direction. We have taken a decision in commercial interest. The resolution plan is almost ready," said Kumar.
Kumar also said that effort is being made by the lenders to keep the airline running in the interest of the country’s aviation sector.
"IBC (Insolvency and Bankruptcy Code), in the case of service industry is the last option. Under IBC the resolution of a service industry like airline is nearly impossible and IBC means that we are grounding the airline," Kumar said.
Earlier on March 20, Moneycontrol had reported that the government was not keen on insolvency process being initiated under the National Company Law Tribunal (NCLT).
Banks want to avoid taking the cash-strapped airline to NCLT under insolvency code (IBC).
A significant portion of the loans were not backed by collateral of tangible physical assets. These loans were given on the airline’s brand value, which will command limited value once the airline is grounded.
The government is certain that it wants to avoid a repeat action of Vijay Mallya-led Kingfisher Airlines, which nosedived into losses and have remained grounded since 2012 amid a piling rubble of unpaid loans.
"The loans (to Jet Airways) was given against brand value and no tangible collateral. If the airline goes into insolvency, banks would not be able to recover any value," a source said.
KFA's grounding resulted in thousands losing jobs, with vendors and aircraft lessors suffering major monetary losses.
Fears of a similar playout is now looming over Jet, with nearly 80 of its 119 aircraft grounded as of March 19.
Kumar also said that lenders are also in discussions with Etihad and there hasn't yet been any conclusive decision on Etihad's part on exiting the business. However, Etihad has certain conditions that the airline should be run in a professional manner.
A SBI-led lenders' consortium was in talks with Etihad Airways, which owns 24 percent stake in Jet Airways, to infuse extra capital worth Rs 750 crore.
There is heightened speculation that the Abu Dhabi-based airline will walk out of the airline completely and sell its stake to lenders.
Eithad's plan to own majority stake in Jet would run into India's foreign direct investment (FDI) rules, which caps any foreign airline's stake in a local carrier at 49 percent.
Bankers, however, "want either Etihad or Jet to push in funds to retain the board position," making the situation tricky.
"Our interest is in Jet Airways, and not the promoters, and discussion with Ethiad is on. Ethiad will take decision based on their assessment of the situation. It is not that they have conclusively decided that they will go out," Kumar said.
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