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By Aftab Ahmed and Aditi Shah
NEW DELHI (Reuters) – The Indian government has asked the public banks to rescue Jet Airways, a private company, without bankruptcy, while Prime Minister Narendra Modi seeks to avoid thousands of job losses several weeks before the holding of general elections Reuters.
Last year, the Ministry of Finance asked banks, led by the State Bank of India (SBI), to take stock of Jet's financial health, the public said. In recent months, banks have provided weekly updates on a stimulus package and have also sought the advice of the government, added the citizens.
"Senior officials at the Ministry of Finance are asking for regular updates on the issue," said an official of one of Jet's lenders, who did not want to be identified because the discussions were private.
The details of the discussion between the Ministry of Finance and the bankers about the bailout of Jet have not yet been reported.
New Delhi urged public banks to convert their debts into shares and to take a stake in Jet in a rare initiative in India to use taxpayers' money to save a troubled private sector company from bankruptcy . The two people plus an additional source, however, said that this would be "transitory" and lenders could sell the stakes once Jet revives.
The government also boosted its 49% -owned National Investment and Infrastructure Fund (NIIF) to invest in new blockaded infrastructure projects to take a stake in Jet, a announced a separate government source.
Facing more than a billion dollars in debt, Jet is struggling to stay alive. It has delayed payments to banks, suppliers, employees and aircraft renters, some of whom have begun to terminate leases.
The world 's largest democracy is gearing up for elections next month and its burgeoning aviation sector, which employs close to one million people, is one of the success stories in the world. job creation that Modi can cite while he's looking for a second term.
It is crucial for India to revive Jet because the collapse of its second airline could have "dire consequences for the investment climate" in the sector, a senior government official told Reuters.
The official fears that if Jet collapses, it could drive up airline tickets in a fast-growing market, shattering efforts to allow low-cost air travel in the interior.
A chaotic ending could also make it more difficult for the government to sell a stake in Air India, at least in the short term. Last year, he did not sell any of his stake in the indebted carrier, which currently relies on taxpayer money.
If the government plan in favor of Jet succeeds, state banks, including SBI and Punjab National Bank (PNB), as well as the NIIF would together hold at least one-third of the airline until they find a new buyer.
At present, Etihad Airways, of Abu Dhabi, is Jet's largest shareholder with a 24% stake.
The Indian finance ministries, SBI, PNB and Jet Airways have not responded to requests for comments.
KINGFISHER EXHAUST
Most companies in Jet's financial situation would be placed by creditors in India's new bankruptcy process, said two bankers. However, memories of the chaos caused by the disappearance of Kingfisher Airlines in 2012 led the government to seek a more sober route to rescue, they said.
The bankruptcy of Kingfisher resulted in job losses, donors lost millions of dollars and banks suffered mbadive write-downs.
Bankrupting what is essentially a service provider such as Jet would have the effect of reducing its value because it has no major badets, unlike a manufacturing company, most of its aircraft being leased, said another manager government.
If the country went bankrupt and the lessors started to withdraw more aircraft, there would be nothing for potential investors, the official said. Already, in the last three months, 41 landlords have been immobilized by the lessor, resulting in flight cancellations.
While, on the surface, Jet's future still depends on its largest shareholder, Etihad, about the final terms of any deal, backstop government support means that there will likely be a bailout .
One of the sources does not have easy solutions, added one of the sources, adding that the lenders are not competent to manage an airline, they had to decide what to do once they would convert their debt into actions.
New Delhi is also supporting a proposal to resign from Jet's founder and president, Naresh Goyal, if that means saving the airline, another official said.
"Save Jet is not equivalent to saving Goyal," said the manager.
THE FLIGHT OF THE AIR
Jet, with its fleet of 119 aircraft, once controlled one-sixth of India's domestic aviation market. The 25-year-old airline is also one of only two full-service carriers offering international flights. The other is Air India.
The government ideally wants four to six major airlines to ensure that fares are competitive and that pbadengers have more choice, according to the main government source.
India plans to build 100 new airports costing about $ 60 billion and requiring a steady stream of flights to support them, and this is only possible if there are enough airlines, another official said.
"Investment in these airports will depend solely on the willingness of operators to have scheduled flights at affordable prices and the bankruptcy of an operator helps nothing," he said.
(Report by Aftab Ahmed and Aditi Shah, edited by Martin Howell and Christopher Cushing)
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