Jet Airways shutdown raises doubts on role of SBI, Govt

Amidst speculation of a bidder for Jet Airways, the 25 year old airline which shut down on Wednesday, uncomfortable questions are being raised about the role of the Government and the State Bank of India.

The closure of the airlines has directly affected 16,500 employees of the airlines. But aviation experts say that the total impact will be on 80,000 jobs including those of vendors. Only a handful of the current employees can hope to get absorbed, they feel.

While the airlines has been going through a liquidity crunch for the past several months, aviation experts wonder how a well established and good airline could suddenly go bust. “Were the promoters siphoning off money or is it a case of poor management—is something that only a forensic audit will reveal,” said Parvez Damania, an aviation expert and former promoter of Damania Airlines.

Doubts are being raised about the manner in which the airlines has been shut down. Why did the Government allow the State Bank of India to convert ₹8,500 Crore worth of loans to equity last month ? Why did the SBI and the Government allow Naresh Goyal, the London based promoter and majority shareholder, to resign, give up his shares and leave India?

Aviation circles are abuzz with speculation that an airlines owner close to the BJP is likely to buy stakes in jet Airways once the share prices collapse further.

The closure has raised eyebrows also because on March 25 the State Bank of India chairman Rajnish Kumar had declared in an interview, “We are confident that Jet Airways has value. It has a fantastic brand value and will not be put under liquidation. The media has been talking about taking the company to NCLT (National Company Law Tribunal), but let me tell you that in the case of airline companies, NCLT does not mean revival but liquidation. And Jet Airways hasn’t reached that state,”he had said.

What happened then between March 25 and April 17?

Parvez Damania on Thursday told Bloomberg Quint :

• I’m confused as to how the lenders handled it. If they were seriously planning to help the airline or market it as a saleable product, they should have pumped in ₹1,500 Crores, got the airline into shape & then marketed it.
• I’m also confused as to how SBI handled it. They said it’s a great brand. Won’t let it down. Then why dilly dally? If so, much of due diligence was done before giving the ₹400-500 crore, why was this due diligence not done before giving the ₹8,500 crore (as loan and then turned into equity).
• Did they not see losses mounting? Why did they not intervene when Jet was working at full capacity? It was a good airline, a good brand. Why they missed that opportunity. Will there be an investigation?
• They were to infuse ₹1,500 crores. Why did they not? On March 25, the SBI chairman said that this was not an NPA. Why did they convert the loan to equity if they were not going to do anything about it? How much has AAI lost? How much has Indian Oil lost? How much have thousands of small vendors lost?
• If the parking lots of Jet are distributed to other airlines, aircrafts taken back by leasing companies, aircrafts owned by Jet attached by the banks, what will be left for the new buyer to buy? If SBI doesn't get a buyer, what will they do with the equity that they have?
• Has Naresh Goyal given any personal guarantees? He has been let completely off the hook. SBI made him resign. They have taken over management of the airline. He is no longer in the country. He walks scot free. Why did they let Goyal go?
• This is going to be worse than KF. Look at the work force of Jet Airways and the labour that was outside their payroll. So many lives have been devastated. Terrible setback for the aviation industry. Huge gain for present airlines. Indigo will go on an expansion plan.

Journalist Josey Joseph in his book, “A feast of vultures” had dwelt on the alleged links between Goyal and Dawood Ibrahim. Jet Airways & Naresh Goyal had then filed a civil defamation suit against Joseph & the publishers seeking damages worth ₹1,000 crore.