New Delhi — India’s government has asked state-run banks to rescue privately held Jet Airways without pushing it into bankruptcy, as Prime Minister Narendra Modi seeks to avert thousands of job losses weeks before a general election, two people within the administration told Reuters.
New Delhi has urged state-run banks to convert debt into equity and take a stake in Jet in a rare move in India to use taxpayer money to save a struggling private sector company from bankruptcy. The two people plus one more source, however, said this would be “transitory” and lenders could sell the stakes once Jet revives.
The world’s biggest democracy is gearing up for an election next month and its booming aviation sector, which employs close to a million people, has been one of the job creation success stories that Modi can point to as he seeks a second term.It is crucial for India that Jet revives as the fall of its second-largest airline could have “disastrous consequences for the investment climate” in the sector, a top government official told Reuters.
India’s finance ministry, the State Bank of India, Punjab National Bank and Jet Airways did not respond to requests for comment. If it is pushed into bankruptcy and lessors start pulling even more planes out of service, there would be nothing left for any potential investors, the official said. Already 41 planes have been grounded by lessors in the past three months, leading to flight cancellations.
New Delhi is also backing a proposal for Jet’s founder and chair, Naresh Goyal, to step down if it means saving the airline, another official said. “Saving Jet is not equivalent to saving Goyal,” the official said.
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