India ‘asks banks to rescue Jet Airways’

The Indian government has asked state-run banks to step in and save struggling carrier Jet Airlines, according to Reuters.

India has urged the banks to swap debt for equity, and take stakes in Jet, the news agency said.

With more than $1bn (£750m) in debt, the airline has had to delay payments to banks, employees, suppliers and even aircraft lessors.

India wants to avoid job losses ahead of a general election, Reuters added.

The government has been asking state-run banks including SBI and Punjab National Bank (PNB) as well as the 49% state-owned National Investment and Infrastructure Fund (NIIF) to take at least a third of the airline until new buyer can be found, the news agency said.

Analysis: BBC World reporter Sameer Hashmi

At the heart of this crisis is Naresh Goyal, the founder of the airline.

Etihad, which owns a 24% stake in Jet Airways, had agreed to pump in more money and take control of the airline.

But the deal got stuck after Mr Goyal refused to step down as Jet Airways chairman.

The same thing happened a few months ago when India’s largest conglomerate the Tata group also showed interest in buying the airline, but then stepped back when Mr Goyal refused to resign from the board.

Reports now suggest that Etihad wants to sell off its entire 24% in the airline and exit the business.

Jet Airways was India’s largest carrier in the 2000s, but it started to lose market share after the entry of low-cost airlines like IndiGo SpiceJet, who were able to optimise costs and make money in this hotly contested aviation market.

With a huge aircraft fleet and permissions to fly on many valuable international routes, Jet Airways is an attractive proposition for many investors in the market.

But their condition is simple – that Mr Goyal and his family, that own a majority stake in the airline, need to exit the business.

Analysts say Mr Goyal’s stubbornness in not stepping down is making it difficult for the airline to find investors.

Given that elections are round the corner, the government is putting in effort to rescue the airline.

But even Indian banks are wary of investing in the airline given its precarious situation.

Meanwhile, the airline’s aircraft maintenance engineers’ union has written to the Indian aviation regulator to say that that three months of salary is overdue, and flight safety “is at risk”, the Press Trust of India reports.

The Jet Aircraft Engineers Welfare Association (JAMEWA) said it had been hard for engineers to meet their own financial commitments, adversely affecting their “psychological condition”.

“Therefore the safety of public transport airplanes being flown by Jet Airways across India and the world is at risk,” it said.

Planes grounded

Jet Airways has been having to ground planes due to its financial woes.

It has 103 aircraft in its fleet, and flies on 600 domestic and 380 international routes.

But for now, it only has 41 aircraft operating.

Industry regulator the Directorate General of Civil Aviation has asked the airline to refund passengers, or provided alternative flights, if they are cancelled.