MIAMI — Amid high growth, high loss phenomenon that has engulfed the Indian aviation for as many times as one can remember, the crisis only seems to be deepening.
In less than a fortnight when bankers led by the State Bank of India wrested management control of the debt-ridden and once India’s leading airline – Jet Airways – the airline has been grounded as it has no money to pay for daily operational cost.
For want of new bidders for the airline, the bankers, who have already sunk in over a billion of US Dollars in Jet Airways, refused to infuse any more fund.
Last week, the airline’s operational fleet was down to 10 aircraft, from once an enviable 124 strong fleet.
More pilots had been refusing to turn up for work as their salaries for many months had not been paid. Distressed crewmembers had been accepting jobs at rival airlines at less than half their current salary to keep their kitchen fire burning.
There were talks of Etihad—the minority stakeholder in Jet Airways—picking up additional stake in the airline but that never materialized. And banks, already under severe liquidity crunch and seeing little hope of recovering their money, refused to pump in more funds despite taking over the management control, which led to the grounding of Jet Airways.
The worst sufferers, besides the airline’s staff, were all the stranded passengers, who had booked tickets well in advance but got stuck by thousands as they would come to know of canceled flights at the very last minute.
On the busy metro routes such as New Delhi-Mumbai or Delhi-Chennai, this resulted in last-minute ticket prices shooting up sharply, beyond the affordability of many stranded passengers.
The New Delhi-Mumbai route ticket, which would normally cost around US$80-100 if purchased 48 hours or before, shot up to US$ 250-300. This left many passengers stranded and even looking at railways tickets but to little avail.
The refunds take at least 2-3 weeks to materialize, but if ticketing agents (both online and offline) have passed on the money to the airline, then getting a refund from a bankrupt entity could be next to impossible.
Air India Tightening Up
And while the sector was just embroiled with the Jet Airway crisis, there comes the news that the government-owned and operated airline, Air India, has no money to pay for debt servicing and aircraft leasing installments.
Reeling under a humungous debt of over US$ 7.5 billion, it needs to shell out close to US$ 1.5 billion for debt servicing. The airline has already defaulted on some obligations.
Air India has been making continuous losses for the last 10 years and has been surviving on the generous and periodic dole of public funds by the governments of the day.
And this is no good news for the Narendra Modi government, which is in the midst of a tough parliamentary election. Modi had once proudly claimed that they have turned around the ailing airline, which previous governments had not been able to do.
But as it turned out, it was a hollow claim for public consumption and earning brownie points. The Indian civil aviation ministry is now believed to have sent an SOS to finance ministry pleading for emergency funds to service debts.
As the crisis unfolds and becomes bigger by the day, it remains to be seen how it will impact the larger Indian aviation story.
But it appears that there is not going to be any respite anytime soon from the high growth, high loss syndrome.