Jet Airways operator’s certificate expires today. Will it take to air in 2023?

Many senior executives have already exited the company

The revival of Jet Airways, which has been stuck in limbo for nearly four years now, is unlikely to be completed in 2023, as the airline's air operator’s permit (AOP) or air operator's certificate (AOC) expires on May 19.
Jet Airways was granted the AOC on May 20, 2022, by the Directorate-General of Civil Aviation, to help it start full-scale service by October.

However, a year down the line, Sanjiv Kapoor, chief executive officer-designate; Mark Turner, vice-president of in-flight services; Nakul Tuteja, vice president of human resources and administration; HR Jagannath, vice president of engineering; and Ronit Baugh, head of communications, have all quit.

Jet Airways does not have a management team, and its to-be owners, the Jalan Kalrock Consortium (JKC), have not yet completed the transfer of ownership, and have not yet paid lenders.

JKC was recognised as the successful bidder for the bankrupt airline in October 2020.

Jet Airways was India's second full-service airline apart from Air India since it began operations as an air taxi operator in 1993. It was founded by Naresh Goyal and began full-fledged operations in 1995 with international flights added in 2004. The airline went public in 2005 and in 2007, when it acquired Air Sahara.

It was one of the largest airlines in India, with a 21.2 percent passenger market share in February 2016. It operated over 300 flights daily to 74 destinations worldwide.

As of November 2018, Jet Airways has been reported to have a negative financial outlook due to increasing losses. In March 2019 it was reported that nearly a fourth of Jet Airways' aircraft were grounded due to unpaid lease rates

Emails sent to JKC remained unanswered at the time of publishing this report.

Last week, JKC informed the National Company Law Tribunal (NCLT) that it needs more time to repay creditors and implement the revival plan.

So, will the Jet Airways livery take to the skies in 2023?

"It seems very unlikely," said a source close to JKC, who was aware of the internal discussions surrounding Jet Airways.

He added that JKC is rethinking its revival strategy due to concerns like aircraft delivery timings, rising competition, and in finding a new management team.

"The revival of Jet Airways is through a court-approved process, which has taken more time than originally estimated by us, but needless to say, JKC is committed to the revival of Jet Airways. We are in the last leg of closing the transfer of ownership of Jet Airways to JKC, subsequent to which we will settle the outstanding amounts payable to previous creditors as per our approved resolution plan and shall, soon thereafter, recommence the commercial operations of Jet Airways as per our relaunch plans," Ankit Jalan, board member, JKC, had said in a statement last month after the exit of Sanjiv Kapoor.

However, in its statement to the NCLT last week, JKC asked for an extension of 148 days from May 15 to pay off Rs 270 crore as the first tranche of payment to the lenders of Jet Airways.

"Since banks took 148 days out of the specified 180 to begin the resolution process, JKC said it only had a month to implement the plan, which was neither feasible nor viable. Therefore, we are now seeking an exclusion of that period," lawyers representing JKC had said in the NCLT.

JKC yet to pay lenders, hire CEO

This indicates that JKC is looking to pay off the first tranche to the lenders of Jet Airways by November.

"If JKC is planning to pay off lenders by November, it is unlikely that it will start substantially investing in Jet Airways before then," a senior aviation insider said.

After the exit of Sanjiv Kapoor from the airline, Ankit Jalan, board member, JKC, has said that "JKC will be announcing the new CEO for Jet Airways shortly." However, industry insiders told Moneycontrol that all discussions between Jet Airways and aircraft original equipment makers have been stalled at the moment and that JKC was not 'actively' looking for a new CEO as well.

"JKC has not yet interviewed anyone to be their new CEO and has not yet created a shortlist of candidates," another industry insider said.

Lenders of Jet Airways are expecting Rs 270 crore from JKC in the first tranche, which includes the payment to lenders, workmen, operational creditors, and the CIRP (Corporate Insolvency Resolution Process) cost.
JKC has an added responsibility of paying over Rs 200 crore as Provident Fund and gratuity to Jet employees.

Another indication that Jet Airways is not likely to start operations before the winter schedule at least is that it has not started negotiations with any domestic airport in India for slots and timings.

"Jet Airways is not actively discussing slots, aircraft parking, and ground handling with any airport at the moment," a senior official from an airport operator said.

Similarly, a former senior pilot with Jet Airways, who was with the airline till last year, said that the airline's recruitment drive has also stalled and pilots who were earlier shortlisted by the airline have been asked to look for new jobs.

Additionally, the airline has also come under pressure from vendors with whom the airline had tied up for services, including catering and call centre management, among others.

The resolution plan

JKC was recognised as the successful bidder for the bankrupt airline in October 2020.

According to the resolution plan, the Jalan-Kalrock consortium had proposed a cash infusion of Rs 1,375 crore, including Rs 475 crore for payment to stakeholders.

The remaining Rs 900 crore was to be infused for capital expenditure and working capital requirements. At Rs 380 crore, the lenders took a steep haircut on their admitted claims of over Rs 7,807.7 crore under the approved resolution plan.

The lenders had agreed to the plan submitted by the airline, which was later approved by the NCLT in 2021. Lenders were to also receive a 9.5 percent stake in the airlines and a part of the payment to lenders is from the sale of property owned by Jet Airways.