Seems promoters of Jet Airways missed the memo, where they were supposed to keep a good amount of money handy to celebrate the 25th anniversary of the airline this year. However, what is happening now, is that the airline is in a free fall, and everyone is fighting for their pound of flesh. The latest Jet Airways news is, that Etihad wants to surrender their share, and has very cheekily asked the Indian banks to buy them out, after dragging their feet for 2.5 months on the issue.

The backstory first, very quickly. Jet Airways started to default on payments to employees, in what was an indication of a bigger problem back in August/September of 2018. Once those issues were revealed by the Media, the airline started to be pushed into the death spiral, with a spate of cutbacks for customers coming up first.

• Jet Airways cuts meals for Deal and Light passengers
• Jet Airways passengers denied Lounge Access in Mumbai Airport
• Jet Airways meal cutbacks start
• Jet Airways lounge access withdrawal for Gold & Platinum Members w.e.f December 1
• Jet Airways goes half way to no-frills; will drop meal service on most Domestic Economy Fares next year

But things were still alright, Jet Airways was being engaged by the Tatas for buying out the airline and bailing them out. Except, as I wrote then, it was too early to celebrate a deal which was not even done yet. The deal unwound, and Jet Airways was back in the UAE trying to make amends with Etihad, who they had become a feeder airline to before they started charting out an expansion strategy with Delta and KLM/Air France joint venture. 

Fast forward through the past ten weeks, and the banks who have been owed money have stepped in as well, and there is a huge amount of back and forth about who brings in how much money. Etihad Airways, who is a 24% shareholder in the airline, gave all sorts of indications to the airline and the banks that they were interested in saving Jet Airways, and perhaps even raising their stake in the airline.

But when they have on their own losses, to the tune of 4.8 billion US dollars over the past three years, cutting up their own network, how would Etihad ever have found the cash, even if it was just INR 750 Crores (110 million US Dollars) to infuse a penny more in Jet Airways? After all, Etihad had let Air Berlin, Alitalia, Air Seychelles and others walk down the same road, so why would they save Jet Airways, even if it meant a bit more than the others to Etihad in terms of feeding their USA network?

The airline has been weighing under its own reputation of the past 24 years, shrinking their network, and now cancelling flights left, right and centre, with customers getting last minute intimation about their flights being cancelled. As per a meeting with the government today, Jet Airways is only operating 41 aircraft at the moment, while Jet Airways’ website lists they have 119 aircraft in their fleet. Which means only 35% of their fleet is available at the moment and is dwindling fast. From the meeting today between DGCA and Jet Airways

The latest is that Etihad has refused to infuse the cash in the airline, telling the other stakeholders, i.e, Naresh Goyal and the lenders, that they won’t bring more money on the table. Interestingly, it took them a while to utter the words they would have perhaps been thinking about all along.

So, as per the Economic Times TV Channel, ET NOW, the airline has now offered to SBI and the other banks, that it is willing to step aside, and they could buy them out for a cheap price to exit the airline.

Here is the offer from Etihad, as per ET NOW:

• Etihad will sell their entire 24% in Jet Airways to Indian banks who have loaned money to 9W
• Etihad just wants INR 150 per share as their price to sell, which is just 23% of the price they paid when Etihad entered Jet Airways at INR 650 per share (Jet Airways share price today is INR 228)
• Etihad wants a total of INR 400 Crores (US Dollars 58 Million) towards their stake in Jet Airways being bought out, valuing the airline at about INR 1800 Crores (US Dollars 260 million)

But not just that, Etihad is also willing to sell back JetPrivilege to the lenders or Jet Airways.

Isn’t it just a bluff?

My take for the moment is that while Etihad may be frustrated and wants to throw in the towel as well, they know that they are not going to get anything out of anyone else at the moment. So, they are posturing, trying to make it as difficult as possible for anyone else to ask more from them, sort of saying they will be able to walk away if they had to do anything more than they already did for Jet Airways.

I’d have been willing to believe their bluff had Etihad only offered to sell back their share in the airline. But JetPrivilege is a cash cow, and perhaps the only success they have had with their loyalty business, growing 3X in terms of numbers since being acquired by Etihad, and a big success in India. So much that Etihad has been pumping money into Jet Airways via JetPrivilege by buying advance award tickets on Jet Airways for the whole year. And JetPrivilege is very well integrated into the Etihad Group’s loyalty arm.

Eventually, Etihad knows, sort of, that they don’t want to do more for the airline, but this is just a nicer way of saying no, rather than expecting someone else to buy them out for the moment.

Bottomline

I won’t get taken in with all these attractive headlines that Etihad has finally gotten clarity of thought about their investment in Jet Airways. This clarity of thought did not arrive overnight, and the way Etihad was dragging their feet, it was there all along. At the end of the day, it is just them drawing a line in the sand about how much more do they want to be bothered with Jet Airways.

What do you make of the new situation about Jet Airways and their lost love with Etihad?