5 unanswered questions for SBI bailout of Jet Airways

Jet Airways has lurched from one crisis to another throughout its existence. The noteworthy aspect is that it has always managed to survive whatever the crisis is. The latest mess for the airline is its inability to pay for the lease of its aircrafts and they getting grounded one after the other.

A company is expected to run aground with no money to pay for salaries, principal, interest. Yet, Jet Airways continues to fly even now. What is even more confounding is the fact that the state lender – State Bank of India is leading the bailout plan.

Jet Airways is a listed company. SBI is a listed company. The board of Jet Airways agrees for the bailout plan. Yet, the details of the same are not at all available in the public domain. This leads to many unanswered questions about the bailout plan. We will limit the discussion to just 5 questions.

What is so special about Jet Airways?

Reserve Bank of India has come up with IBC and NCLT to deal with the defaulting companies. Jet Airways has been a serial defaulter to the state-run banks. Yet, it has not been referred to the NCLT. RBI is also silent about this, though it is expected from Shaktikanta Das.

What is the reason for this particular company to be treated with kid gloves?

Why is SBI covering up for Jet Airways?

It is normally expected that the company will try hard for the bailout plan. In this case, it seems to be the other way round.

The other state-run banks seemingly are not that keen about the bailout plan but SBI is. The board of Jet Airways does not send the bailout plan to SBI. Rather, SBI requests the board of the airline to approve its bailout plan.

There has been news that SBI wants a forensic audit of accounts for the last 4 years for the airline but it gets conveniently buried. There has been news that SBI wants to refer the airline to NCLT but it is forced to give a clarification later that the news is incorrect. SBI says that Jet Airways is a standard account, even though there is no repayment of principal and interest.

How much debt is getting converted to equity?

The banks are becoming the majority shareholder of Jet Airways as a result of the bailout plan. Their debt is getting converted to equity. One may ask a basic question to these listed companies – How much debt is getting converted to equity?

The answer is that it is confidential and hence cannot be revealed.

Who is going to invest in the rights issue?

The banks cannot rightfully run the bank so their stakes have to be reduced. To bring down their stake, somebody has to invest in the airline. Jet Airways has proposed a rights issue for this purpose. Now, the question is who is going to invest in this loss-making airline?

Without getting any confirmation from Naresh Goyal about the rights issue subscription, the banks have gone ahead with the bailout plan.

Etihad is struggling for its own survival

Jet Airways and SBI have pinned their hopes on Etihad. Now, the issue is that Etihad itself is struggling for survival.

More importantly, Etihad does not trust Naresh Goyal at the helm of affairs to run the airline. They want him out, and to make matters worse, Naresh Goyal has brought his son to run the company along with him.

In nutshell, Etihad is not going to invest anything in Jet Airways. This does not get reported anywhere in Indian media.


Indian Banks have already burnt their fingers with Kingfisher at the start of the decade. Kingfisher went out of business and Indian Banks were not able to get anything out of Vijay Mallya.

Yet, they repeat the same mistake with Jet Airways. SBI chairman Rajnish Kumar would not take such a big risk on his own. There are many more things in this mess than what meets the eye.

Who and what is forcing SBI to treat Jet Airways differentially and keep it afloat even when Naresh Goyal is incompetent to run the business?

In the meantime, the Indian government is the proud owner of two loss-making airlines – Air India and Jet Airways.

Long live the Indian State.

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