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A Jet Airways passenger plane prepares to land as a new air traffic control tower under construction is seen in the background at the Indira Gandhi International Airport in New Delhi on May 24, 2013. The debt-laden airline is facing increasing flight cancellations as unpaid lessors force grounding of more planes. Reuters file

Jet Airways is plunging into more trouble with other airlines refusing to accommodate passengers from cancelled flights at a time when an increasing number of planes are getting grounded as unpaid lessors harden their stand leading to more flight disruption.

Air India and Vistara have cited the gap between the prevailing fares and what Jet pays under the flight interruption manifest (FIM) for the refusal to accept passengers booked on cancelled flights. The last seats are usually priced much higher than what Jet ends up paying, leading to a commercial loss for other airlines, according to aviation observers.

The Naresh Goyal-founded airline is cancelling more than 100 flights daily with the number of available aircraft plummeting from 103 to 83, news reports say.

An FIM is a document an airline releases as a substitute ticket that allows a passenger to board another airline's flight in case the original flight is disrupted by a schedule change, overbooking or cancellation. In return, the airline whose flight got disrupted reimburses the fare to other carriers on a fortnightly basis at a pre-agreed rate.

Sources aware of the development said Air India and Air Vistara cancelled the agreement on Friday, according to a report on Business Standard. "With immediate effect and till further notice, Jet Airways and JetLite Limited documents, including FIMs, are not to be accepted for travel on Air India flights," a notice issued by the airline's commercial department said.

Industry sources said Vistara cancelled a basic interline agreement on Thursday as the airline felt that the Jet was taking advantage of the lower rate payable under the agreement causing commercial loss to Air Vistara.

Air Vistara
Air Vistara has cancelled an interline agreement with Jet Airways to carry passengers with Flight Interruption Manifest (FIM).Facebook/AirVistara

"Basically, an interline agreement has this loophole where the airlines only pay a pre-determined value to its partner airline. Vistara felt that its last remaining seats, which sell at high fare, was being booked by Jet Airways at the pre-agreed value which is much lower than the current price of its tickets," the report said quoting a source.

While the last few seats on the Delhi-Mumbai flight sell for Rs 12,000, Jet could book them for about Rs 4,000 under the interline agreement. Travel industry sources believe this disparity has led to the cancellation of the deal.

Analysts justify Air Vistara's decision saying that last-minutes fares between metros have firmed up and it's unviable to sell them at a prefixed lower rate.

Time is ticking for Jet Airways as its operational standards are plummeting because the number of available aircraft is going down every day. A consortium of lenders led by the State Bank of India (SBI) has hammered out an agreement to refinance the airline along with its foreign partner, the Abu Dhabi-based United Arab Emirates (UAE) national carrier Etihad Airways. Though an extraordinary general meeting (EGM) of Jet Airways has given its nod for the debt-equity swap that will find the lenders in the pilot's seat of the airline with more than 50 percent of equity, the regulatory approvals are taking time. Some of the conditions set by Etihad that owns a 24 percent stake to bring in more funds also require regulatory sanctions.