You cannot blame the bankers for being chary of lending the Rs 1,500 crore or so that Jet needs as emergency funds to continue flying in the short term. The bankers have been caught on the horns of a dilemma. They are likely to lose either way.
The bankers are well aware that if they don't give out the money, the Jet board has recommended stopping operations. This in turn might deter even the little interest that potential buyers have in picking up the airline. After all, what is the worth of an airline that has practically no fleet left (lessors have taken back around 100 planes it had and the remaining might be repossessed soon as well by lenders) and is operating a truncated schedule with six ATRs and one Boeing 73. It has also a huge workforce that needs to be paid and a lot of fixed costs including food contracts, hanger and other airport charges that will continue piling up whether it flies or not. In essence, the bankers will have to write off the Jet loans - which total around Rs 8,500 crore currently.
On the other hand, there is the risk that if they lend and the airline does not find a suitable buyer or if the airline finds a buyer who is willing to pick it up only if the banks waive off most of the dues, they will be hauled up later by vigilance or other authorities. This is a distinct possibility going by the controversy caused by continued lending to Kingfisher Airlines even when it was in dire straits. Many debt-ridden companies that finally went bankrupt, took lenders' money with them. No banker and no bank CEO wants to take the risk of being put in jail after he retires because of a bad loan.
Thus, bankers are damned if they lend and damned if they do not lend. At least not lending gives them the excuse that they did not want to throw good money after bad once it became clear that the airline was in deep trouble.
16/04/19 Prosenjit Datta/Business Today
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The bankers are well aware that if they don't give out the money, the Jet board has recommended stopping operations. This in turn might deter even the little interest that potential buyers have in picking up the airline. After all, what is the worth of an airline that has practically no fleet left (lessors have taken back around 100 planes it had and the remaining might be repossessed soon as well by lenders) and is operating a truncated schedule with six ATRs and one Boeing 73. It has also a huge workforce that needs to be paid and a lot of fixed costs including food contracts, hanger and other airport charges that will continue piling up whether it flies or not. In essence, the bankers will have to write off the Jet loans - which total around Rs 8,500 crore currently.
On the other hand, there is the risk that if they lend and the airline does not find a suitable buyer or if the airline finds a buyer who is willing to pick it up only if the banks waive off most of the dues, they will be hauled up later by vigilance or other authorities. This is a distinct possibility going by the controversy caused by continued lending to Kingfisher Airlines even when it was in dire straits. Many debt-ridden companies that finally went bankrupt, took lenders' money with them. No banker and no bank CEO wants to take the risk of being put in jail after he retires because of a bad loan.
Thus, bankers are damned if they lend and damned if they do not lend. At least not lending gives them the excuse that they did not want to throw good money after bad once it became clear that the airline was in deep trouble.
16/04/19 Prosenjit Datta/Business Today
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