Jet Airways Devises New, Plausible Management Revival Plans

by Ajay Prakash

A possible turnaround for India’s oldest private airline, Jet Airways, is palpable. In April 2019, due to a lack of funds, Jet Airways halted all its flight operations. Last week the group of lenders approved a bid by a consortium – led by the UK-based Kalrock Capital and UAE-based businessman Murari Lal Jalan.

Jet Airways A340 at Heathrow via Wiki Commons

Jet Airways Creditors

The airline suspended all domestic and international operations in April last year.  At that time the airline owed $1.2 billion to financial institutions, leasing companies airports and suppliers. The airline also had not paid employee salaries for close to four months.

After completing arbitration proceedings and analysis, the airline noticed an accumulation of debt, totaling $1.85 billion. The airline owed $970 million to various financial creditors, including banks – domestic and foreign – and leasing companies. Passenger ticket refunds account for $240 million whereas $30 million is toward unpaid employee dues.

Chronology Crisis of Jet Airways © Asish Sinha Business World (April 2019)

The Revival Plan

There is no official confirmation on the revival deal. However, according to the Hindustan Times, the new owners have agreed to infuse $132 million ( INR 10 billion) as working capital and a similar amount to be paid to the creditors over five years. Over a period, the financial creditors will get ten per cent equity in the airline. Apart from the upfront payments, the new owners are likely to sell all the Jet Airways aircraft and forward the proceeds to the creditors. The new management plans to take newer aircraft on lease.

At the time of the grounding, the airline had a fleet of about 120 aircraft serving dozens of domestic destinations and popular International hubs such as Abu Dhabi, Dubai, Singapore and London. Additionally, The airline had a code-share agreement with Etihad Airways. Currently, the airline’s fleet consists of three Boeing 737s and twelve Airbus A330s.

The revival bid is to be submitted to the National Company Law Tribunal (NCLT) for a final nod. Once approved,  Fritsch and Jalan could become the new owners of the beleaguered airline.

Jet Airways Employee via Al-Jazeera © Danish Siddiqui Reuters

At its peak, Jet Airways had about 17,000 employees. It is not clear what would be the fate of these employees under the new management. Most of them have since relocated to other airlines, but the few that have stuck back with the airline are keenly observing the revival proceedings.

Jet Airways’ Uncertain Future

The revival plan comes at a time when the airlines around the world are struggling to survive. In India, the airlines have had their fair share of misery. Losses for every airline have mounted. Even the domestic traffic is still less than 60% of the March 2019 levels.

Kapil Kaul, Head of Aviation Research CAPA, India says –

While the approval of a potential revival plan is a major development for the airline, recommencing operations will be very tough and uncertain”.

Kaul went on to say that the terms that were accepted by Jet Airways’ creditors did not make sense to CAPA.

The fall of Jet Airways started in 2018 when the airline tried and failed, to compete with low-cost carriers. However, the airline may retain its old avatar ‘Jet Airways’ but whenever it flies, it would be a different airline for sure.

What do you think about the Jet Airways revival plan? You may write your views in the comment section below.

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