Staff hold on to vague promises as Jet Airways continues descent

Only way for survival, analysts say, is a total revamp - in other words, a Goyal-free Jet

There is nothing new about the year for Jet Airways. In the last quarter of 2018, the airline frequently cancelled flights. On one weekend, according to pilots and engineers, 24 Jet were cancelled. Old Jet loyalists continue to abandon the airline — the lounge access is gone and disruptions are too common. The New Year saw the Icra downgrading its rating after the airline defaulted on payments to the State Bank of India.

For the past five months or so, salaries and allowances have been paid in fits and starts. Pilots, cabin crew and engineers have not been paid most of their dues and arrears for the past two months and a bit. The staff is holding on to vague promises: All will be well by March, although no one could explain how. 
 

Now, things seem to be turning uglier. Some pilots and crew claimed that certain union members were being paid all their dues and a bit extra to act at the behest of the management. They said the last thing the management wanted was the pilots uniting and finding the strength to go on strike.

A Jet spokesperson, however, said: "Jet continues to operate according to its published schedule. The cancellations are well in line with industry benchmarks. The company is committed to meet its salary obligations towards its employees and has assured a section of its employees comprising pilots, AMEs and members of the senior management, of clearing all pending dues by April 1, 2019. All employees, including pilots and engineers, continue to actively cooperate to ensure a successful turnaround."

Resignations are not happening with the frequency that the management would look for in the present situation as everyone is owed money, so no one wants to leave. Employees are, somehow, still convinced the airline won’t go the Kingfisher Airlines (KFA) way. Staffers are finding it hard to pay EMIs and, in some cases, defaults have been reported. Many pilots and co-pilots are often quite a flashy bunch, living far beyond their means. One commander said: “Their private cars often resemble the aircraft they pilot in size and EMIs are hefty.” 

Pilots say they are stressed, indicating safety hazard. But the senior management is saying little. 

After the Tatas dropped the deal, there was hope that Etihad would infuse fresh funds. Now, that too looks shaky, as the relationship between Etihad and Jet promoter Naresh Goyal is at an all-time low. There is a chance, however, that Etihad may still support an interim line of assistance for the sake of business.

But interim lines of support are unlikely to help much. The carrier’s liquidity position is stressed with operating losses, high debt levels and a negative net worth. In the six months ended September, Jet reported a net loss of Rs 2,587 crore on an operating income of Rs 12,748 crore. For the 12 months ended March, the net loss was Rs 724.9 crore on an operating income of Rs 24,455 crore.

What is even more alarming than the current balance sheet position is what the future expects them to deliver. According to an analysis by Icra, repayments of Rs 1,700 crore are due between December and March. Repayments of Rs 2,444.5 crore would be due in FY20 and Rs 2,167.9 crore in FY21, the report said.  The government is not keen to see the airline going under at least till after the general elections. In other words, the official sympathy for Jet is likely to last for at least another six months. Hence, dues to the Airports Authority of India, oil companies and others where the government may be able to exert some influence can be put on a lower priority till then.

There is a near total consensus among analysts that the only way for the airline’s survival is a total revamp of its present model and a dramatic change in the way things are run — in other words, a Goyal-free Jet. Even the mid-term market report by the Center for Asia Pacific Aviation — usually the most optimistic cheerleader for the industry — said a long-term revival without change in ownership was not feasible.

All eyes are now on Goyal — will he finally see the writing on the wall and agree to a graceful exit while someone still sees some value in the brand or will he fight to the bitter end and go down screaming like KFA owner Vijay Mallya? 

Ultimately, the government ought to force him into doing the right thing. It watched and twiddled its thumbs while Mallya got away leaving behind a long line of creditors. In the case of Goyal, it has even less to hold on to.