Jet Airways India Ltd.
has piled on $1.1 billion in debt and failed to pay loans and salariesPrime Minister Narendra Modi rode to power five years ago on his business friendly credentials and promise of generating millions of jobs.
Now an airline is on verge of collapse, bringing PM Modi's image under attack just months before national elections.Struggling in a competitive market where basic air fares can get as low as 2 cents, Jet Airways India Ltd., country's second-biggest airline, has piled on $1.1 billion in debt and failed to pay loans and salaries.
With about 23,000 jobs at stake, pressure is building on PM Modi for a rescue package as a collapse would mean bad optics in his re-election bid in a poll due by May.While PM Modi is not to blame for unraveling of Jet Airways -- airline was brought to its knees because of high fuel prices and intense competition -- his policies to make air travel affordable to more and more Indians didn't help it either.
The fate of teetering carrier is now part of opposition's narrative that businesses are ailing, with $2.6 trillion economy losing jobs on PM Modi's watch.The issue of jobs "is going to be at forefront of campaign," said Manish Tewari, a spokesman for main opposition Indian National Congress.
"There has been gross mismanagement of economy," Mr Tewari said.
"It is not surprising that even aviation and some of airlines that have been doing very well in past are now bleeding and hemorrhaging."The ruling party argues failure of a corporate like Jet Airways should not be linked to government.
Still, "if policy intervention is required, government will be open to that," said Gopal Krishna Agarwal, a spokesman of Bharatiya Janata Party.
"If it is a corporate failure, government can't intervene in every point of time."Rescue BidAs crisis at Jet Airways unfolded last year, government reached out to salt-to-software Tata Group to help rescue airline, people familiar with matter said in November, an effort that later fizzled.While administration has maintained it won't interfere in private businesses, history shows it has been difficult for Indian governments to stay away.
Jet Airways's troubles are reminiscent of now-defunct Kingfisher Airlines Ltd., which in 2011 defaulted on loan payments, airports and staff, forcing then Prime Minister Manmohan Singh to urge state-run banks to extend a helping hand.About eight years after that failed attempt, government-owned banks that are struggling to rein in bad loans are at it again -- this time to resuscitate Jet Airways.
The carrier has accumulated more losses than any other publicly-traded carrier in Asia apart from Pakistan International Airlines Corp.State Bank of India, country's biggest lender by assets, is now at forefront of a bailout deal being worked out as carrier considers "various options on debt-equity mix." Lenders, led by SBI, have sought Rs 3,500 crore ($492 million) of investment from founder Naresh Goyal and Etihad Airways PJSC, which owns 24 percent of company, before they can revamp its debt, people with knowledge of matter said last week.The Bharatiya Janata Party-led government has intervened in businesses in past.
When troubled lender Infrastructure Leasing Financial Services Ltd., part-owned by some government firms, missed repayments on $12.6 billion of loans last year, it seized control.
That was only second time since 2009, when government under Singh took over Satyam Computer Services Ltd.
after it falsified accounts, and later sold software maker in an auction.The cases of Jet Airways and Kingfisher also show how difficult it is to run a sustainable airline business in India -- world's fastest growing market, yet also one of costliest.Jet Airways once challenged monopoly of state-run Air India Ltd., but failed to raise fares as a slew of budget carriers including market leader IndiGo started luring customers with on-time, no-frills flights more than a decade ago.
As a result, Jet Airways has lost money in all but two of past 11 years, and saw its market share halve to 16 percent during that period.'Sense of Urgency'The Jet Airways situation makes it "imperative for government to do something because they can't seem to be reticent on such a key issue where so many jobs are at stake," said Raghbendra Jha, who has authored a book on India's political economy as an economics professor at Australian National University.
"It is also politically imperative because elections will be announced soon.
There's a sense of urgency in this."The government is aware of Jet's discussions to salvage operations, but there has been no formal request for any help, aviation secretary R.N.
Choubey, top bureaucrat in civil aviation ministry, said last week.The restructuring plan may also include changes to its board, according to a statement last week and still needs to be finalized and approved.The government will ensure that control of airline remains in Indian hands, Choubey said.
Indian regulations do not permit foreign airlines to own more than 49 percent of local carriers.(Except for headline, this story has not been edited by TheIndianSubcontinent staff and is published from a syndicated feed.)