Etihad Airways has kept the Jet Airways rescue plan on hold even after a memorandum of understanding (MoU) between the two partners, it is learnt. In an indication that hurdles remain before the lenders-led resolution plan can be executed, the Etihad board did not take a decision on the proposed deal, especially on interim funding, in a meeting on Monday, sources in the know said. Jet Founder-Chairman Naresh Goyal, in a recent communication to Etihad group CEO Tony Douglas, had made it clear that the Abu Dhabi-based carrier must infuse Rs 750 crore urgently as planes were getting grounded and dues to lessors and staff were pending.
A company executive said in the absence of Etihad board approval to the resolution plan, the clock was ticking for Jet Airways. On Tuesday, four more Jet planes were grounded due to non-payment to lessors, increasing the count of the grounded planes to 54.
According to lenders, who have steered a rescue plan for Jet, there has been no communication from Etihad Airways on whether it would pay the proposed Rs 750 crore as its share of interim financing to keep the airline going. Etihad is learnt to have discussed the matter, along with the bank-led resolution plan, in its board meeting on Monday, but a decision is pending. A senior bank executive said there were indications that Etihad might ask for more time to arrive at a decision on interim funding.
According to lenders, the board meeting of Etihad was inconclusive on investing in Jet the way it was stipulated in the draft resolution plan. Goyal wants Etihad to match the contribution of the lenders in the interim finance plan.
A senior official at a bank said no fresh funding had been provided to Jet by any lender including Punjab National Bank when the resolution plan was being finalised. The stakeholders need to decide before March end, he added.
Etihad group CEO Tony Douglas
An Etihad spokesperson, when asked whether the decision on the resolution plan had been deferred, said the airline would not comment on any rumour or speculation. The spokesperson refused to either confirm or deny anything. Jet Airways did not respond to an email query.
Last week Goyal and Etihad entered into an MoU, spelling out the equity contribution of the partners, ownership and board structure. The MoU was agreed upon after months of disagreement between the two sides on shareholding and control issues.
Under the interim financing arrangement, around Rs 4,000 crore would be put into the company to get it back on the rails, with Etihad and the lenders putting in Rs 1,500 crore.
Jet Airways would also raise a facility of $150 million by pledging its shares in Jet Privilege Pvt Ltd (JPPL), which manages the customer loyalty programme of the airline. In the meantime, the problems for Jet are mounting.
On Monday, Jet had defaulted on debt repayment. And on Tuesday, it was forced to ground four more planes over non-payment of lease rent. Already, over 40 per cent of its fleet is on ground.As part of the lenders-led resolution plan, Etihad is expected to infuse Rs 1,600-1,900 crore for 24.9 per cent stake (up from the current 24 per cent).
Lenders, led by the State Bank of India (SBI), would infuse Rs 1,000 crore for 29.5 per cent stake and the proposed new investor — National Investment and Infrastructure Fund (NIIF) — would bring Rs 1,600-1,900 crore for 20 per cent stake. Goyal’s ownership in the airline would fall from 51 per cent to 17.1 per cent.