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Issue:January' 2018


Government’s policy lopsided

Naresh Goyal The collapse of Jet Airways, the oldest private airline, has put focus on the lopsided civil aviation policy of the government. A total of six airlines have closed down in the last five years. The abrupt closure of the Jet Airways turned more than 16,000 of its employees jobless.
The experts feel that if the present crisis is allowed to continue, it will lead to ‘unprecedented’ crisis in the industry and result in more and more employees being thrown out of employment. Started in April 1992, Jet Airways suspended its flight operations in mid-April because of paucity of funds. It owed Rs 8,500 crore, mostly to the Public Sector banks. Three years ago it was adjudged as the second largest private airline after IndiGo in India, with a 17.8 per cent passenger market share. The fall of Jet Airways is considered by experts as the fall of its owner, Naresh Goyal.

Abrupt policy changes by the government helped Jet Airways and scuttled the scope for a fair competition, thanks to Goyal’s connections at the highest level irrespective of which party happened to be ruling at the Centre. For instance, he started Jet Airways in partnership with Gulf Air and Kuwait Airways.

An employee of Jet Airways cries as she joins colleagues in a gathering to appeal to the government to save their company When Tata group came out with a proposal to start a new airline in collaboration with Singapore Airlines, the government changed the policy prohibiting foreign airlines owning equity in India airlines. Once the Jet Airways had acquired substantial market share in India, the government changed its policy and permitted Indian private airlines to operate it flights to other countries, which was till then the prerogative of Public Sector carrier Air India.

In 2005 Vijay Mallya started his Kingfisher Airlines which never turned out to be a profit-making venture. But the Public Sector banks liberally advanced money to the Airlines. Under the burden of huge debts, it collapsed in 2012.

To speed up the lease of Jet planes to other airlines, the Finance Ministry has decided to waive a mandatory customs requirement, according to which, grounded planes of Jet Airways had to be first sent to the country of registration of their lessors and then fly back to India; then only they can be used by other carriers. The Ministry of Civil Aviation formed a committee consisting of airports operators, Airport Authority of India (AII) and Directorate General of Civil Aviation to temporarily re-allocate Jet’s slots.

Sandip Sabharwal As the banks have not come out with any plan to help the Jet, independent market adviser Sandip Sabharwal wondered why Punjab National Bank, which gave Rs 11,00 crore to a ‘fictitious’ firm of Nirav Modi, failed to cough up even Rs 400 crore to save Jet Airways.

While a consortium of lenders led by State Bank of India is working on a debt recast plan for Jet Airways, Air India and Spice Jet are working on a plan to induct Jet’s planes on either ‘wet’ or ‘dry’ lease. In a ‘dry’ lease, the owner provides the lessee with an aircraft without a crew while in a ‘wet’ lease the owner provides the aircraft as well as the crew members to the lessee and also promises to conduct adequate maintenance and procure the insurance necessary to operate.

Public Sector banks which account for 70 per cent of the over Rs 7,000-crore loan given to Jet Airways will take the biggest hit if no buyer is found. State Bank of India and Punjab National Bank together are said to share around 53 per cent of the total loan amount.

The other Public Sector banks which have lent heavily to Jet include Canara Bank, Indian Overseas Bank and Bank of India. Among the private banks which have lent to Jet include YES Bank, ICICI Bank and IDBI Bank. As the banks have not come out with any plan to help the Jet, independent market adviser Sandip Sabharwal wondered why Punjab National Bank, which gave Rs 11,00 crore to a ‘fictitious’ firm of Nirav Modi, failed to cough up even Rs 400 crore to save Jet Airways.

Jayant Sinha However, the real problem is the re-employment of the employees rendered jobless by the collapse of Jet Airways. Minister of State for Civil Aviation Jayant Sinha has observed that ‘we want to make sure that the very capable and talented employees of Jet Airways are absorbed in the aviation ecosystem as quickly as possible and that they have a very good and soft landing. We are very focussed on ensuring good employment prospects for them’. This clearly means rehabilitation of only a few.

The All India Trade Union Congress (AITUC) has urged the government to absorb the employees of Jet Airways as it feels the government is entirely responsible for job losses following the end of Jet Airways operations. It said, ‘Government, banks and other airlines are talking about anything and everything except continuing employment of these employees. This is ‘ease of doing business’ – nobody considers the liability of the employees’.

AITUC added that ‘it is a known fact that many of the airlines are struggling to remain afloat because of high fuel prices, for which the Central Government is entirely responsible’.

A senior Air India official has been quoted by a financial newspaper as having observed that it is a misconception that privatisation is a remedy which can make an airline profitable or efficient.

-- N D Sharma