Jet employees propose Rs7,000-cr bailout for grounded carrier
30 April 2019
Employees of Jet Airways have proposed to take over the ailing airline, investing about Rs7,000 crore – with Rs3,000 crore coming from an external source and the remaining Rs4,000 crore in employee stock options (ESOPs) – in an attempt to salvage the grounded airline.
In a letter addressed to the State Bank of India (SBI)-led lenders’ consortium, the employees have laid out their plan to join hands with an external investor. They have, however, not disclosed the identity of the external investor.
“We would like to suggest that Jet Airways be taken over by a consortium of employees and external investor(s)...the contribution of the employee group over a hypothetical over-five-year Employee Stock Ownership Programme (ESOP) is likely to be upward of Rs4,000 crore. In addition, we are confident of securing up to Rs3,000 crore from outside investors,” says the letter, addressed to SBI chairman Rajnish Kumar.
“On the basis of extensive discussions with various employee groups across the company, and also with colleagues who have in the past successfully held senior management positions, we would like to suggest that Jet Airways be taken over by a consortium of employees and external investor(s),’’ the letter written by Ashwani Singh, general secretary, Society for Welfare of Indian Pilots, and Ashish Kumar Mohanty, president of Jet Aircraft Maintenance Engineers Welfare Association, adds.
The other signatories to the letter include PP Singh, senior vice-president (operations) and accountable manager — JetLite, and BB Singh — manager, human resources, Jet Airways.
“It is realistic to understand that the employees would not have the cash or credit needed to buy the company outright. The contribution from employees would be realised from their future earnings and increased productivity, a value that can be quantified in advance with a fair degree of certainty,” the letter stated.
According to Tyagi, the employees have already approached some investors. “We are in conversation with other employee unions as well,” he said.
“We have discussed these issues informally with our colleagues in different sections of the company who have reposed their confidence and faith in an employee-led turnaround plan that is modelled on similar turnarounds in the West, like that of United Airlines in 1994,” the letter said.
“This exercise will necessitate a complete overhaul of the management team of the company and re-establishment of priorities of the short, medium and long term. The required investment and other modalities on the financial aspects can be duly deliberated over meetings to ensure complete confidence of the bankers in this unique effort of recreating and establishing a version 2.0 of Jet Airways,” it added.
As things stand, there are four bidders, including Etihad (which holds 24 per cent in Jet Airways) who are keen to acquire the company and the bidding process is set to conclude on 10 May. But, there are concerns that the lenders may have to take a large haircut on their Rs8000-crore exposure.
Jet Airways announced a temporary shutdown on 17 April citing lack of funds.