For many employees of Jet Airways, loss of place may have now turned into a loss of face too.
As if losing their jobs was not hard enough, recently some Jet pilots had to allegedly face some serious humiliation as well. At a recruitment drive, a senior SpiceJet executive allegedly said the airline was doing ‘charity’ by hiring out-of-job Jet pilots.
SpiceJet rushed to deny the episode after the report stirred a hornet’s nest. The plight of the hapless pilots, however, was not lost on anyone.
As the dust settles after Jet’s crash-landing, the extent of the toll the fiasco has taken on the airline and beyond is now becoming clear.
Here’s a look at the aftermath of Jet’s sinking, and how it has impacted jobs, business and other associated areas.
Out of the frying pan, into the fire
At the time of the grounding, Jet had near about 20,000 employees — some report put the number at 23,000 — many of whom haven’t got their salaries for months on run. Apart from regular employees, the airline also had thousands of outside workers linked to its operations.
A good many top executives are among thousands of Jet’s employees lining up at the job market after the airline stopped its operations and its CEO admitted that he “didn’t have an answer as to the fate of its 20,000 employees.”
HR and recruitment companies like TeamLease and ABC Consultants have confirmed the rush of jobseekers who once were Jet employees. More than 1,300 pilots are now out of job after the airline halted operations on April 17.
According to a PTI report, the officers & employees union of Jet has demanded intervention from the government to stop a Kingfisher-like situation, where the staff never got pending salaries after the airline wound down.
CXO salary packages are more than Rs 1 crore a year without ESOPs. Mid- to senior-level staff take home anywhere between Rs 35 lakh to over Rs 1 crore per year, HR company insiders have revealed.
The top talent at a firm are the first to know when the business is going down. So why did Jet’s top execs dither? “In this case, they were waiting and watching till the end for a stronger leadership as part of the much anticipated takeover,” ET’s Prachi Verma quotes an HR analyst as saying.
Exports: Jet, Set, Wait…
Many businesses associated with airline industry — such as vendors, in-flight caterers and hotels — have taken a huge hit. The airline already owes Rs 3,500 crore to these companies.
The grounding of Jet — which had the highest capacity for cargo and accounted for 50% of exports from Mumbai to London, Amsterdam, Paris and Singapore — has badly impacted the export of fresh fruits/vegetables.
The shutdown has specifically hurt fresh produce exports to Europe, especially the UK. 50 tonnes of veggies were being shipped daily from Mumbai to London. Jet, which operated three daily flights on that route, had a majority share in this trade. Its second largest share of shipping — volume wise — was on the Emirates (via Dubai) route.
With Jet down, freight rates have shot up significantly from the earlier average of Rs 75-80 per kg to well over Rs 100, reports have revealed. That has left exporters unable to meet their volume and price commitments with buyers. Dramatic reduction in capacity has more or less hit all major export items.
The money in your A/C
Another big impact is likely to be seen in savings. Jet owes Rs 8,500 crore to lenders. Potential investors are now asking them to take an up to 80 per cent haircut on the debt. It means even if the lenders find a suitable buyer, they will probably take a huge hit.
It queers the pitch for the banks’ plan to recover some of the debt by selling the airline.
Now the question is: where will the banks recover all this money from?
Answer : Customers like you and me, although indirectly.
Also, all ticket-related transactions by the airline now stand suspended, which has led to cancellation of tickets for thousands of flyers. They will now have to wait for a refund indefinitely.
Share prices tell a story
Jet’s share price has been on a sharp downward slide ever since it became clear that the airline would go down. The long-term downtrend holds despite a bit of a recovery over the last few days.
Overall, latest movements in aviation stocks have a story to tell. While Jet Airways languishes, shares of rival airlines such as IndiGo and SpiceJet are skyrocketing. InterGlobe — which runs IndiGo — and SpiceJet have become globally the most expensive airline stocks, having soared amid Jet’s sinking.
The Jet share price blow will be telling on not just those who hold Jet shares. If the mutual fund you invested in had bought into these shares, you too will stand to lose money along with your fund.
So, IBC now? A Rs 25 lakh loan may hold the key
One of Jet’s service providers has now slapped it with a threat to send the grounded airline to the bankruptcy process. Jet has been warned by Rajan Rakesh & Bros that the insolvency resolution process would trigger if its dues are not paid within a stipulated time.
The default amount in this case is a little over Rs 25 lakh. Rajan Rakesh & Bros – the operational creditor with ‘The Mirador’ brand — has received no payment from Jet since January 2, the notice said.
Following this development, banks — trying to find a strategic buyer and financial investors for Jet — are now likely find themselves under more pressure.
The other looming crisis
Close on the heels of Jet’s drowning, India could be staring at another catastrophe of similar proportions too. Merely days after Jet went under, insiders revealed that India had a Rs 9,000-crore debt repayment coming up but no means of servicing it.
The Maharaja’s only hope probably lies in yet another government bailout, but a quick fix is highly unlikely in view of the ongoing general elections.
So, another similar episode, but bigger in scale and intensity, looming? We’ll know in a little while.