Its four bidders may ask Jet Airways lenders to take a significant haircut.
Shorn of some of its most valued assets, Jet Airways has become less of an attractive prospect for its suitors.
Since the airline suspended operations on April 17, the troubled carrier has lost slots in airports and its aircraft. In addition, some of its most experienced pilots and crew members have joined the rivals.
"Jet Airways doesn't have much of a value. Why would you spend $2 billion on it?" asks Mark Martin, founder and CEO of Martin Consulting LLC, an aviation advisory and consulting firm.
This will have a bearing on the bids that will be submitted by the four shortlisted bidders. The bidders are Etihad Airways, TPG Capital, Indigo Partners and NIIF. The deadline is May 10.
Slots in airports, especially those in the metros, are precious assets for an airline. The number of slots determines how many flights an airline can operate out of an airport.
But, in the case of Jet Airways, the government has started allotting 440 of its slots to rivals, including SpiceJet and IndiGo. While the government is giving the slots to ensure that there are enough flights to cater to the demand and keep a check on air fares, it is a serious drawback for Jet Airways.
The airline had 280 slots in the Mumbai airport and 160 in Delhi - the two busiest airports in the country.
Though these slots may be given to rivals for a limited period, it will not be easy for Jet Airways to get those back once its new owner manages to resume operations.
"It's very difficult to get these back, unless one has political clout. For instance, once these slots are given to other airlines, they will expand their fleet and increase flights. What will they do later," said a senior executive from the industry.
By the time Jet Airways suspended its operations, the airline was down to five aircraft. It originally had 119 planes, including 16 that it owned. The rest were leased from lessors.
According to the industry regulator DGCA, nearly 50 of Jet Airways aircraft have either been re-registered or received a request to do so. Once de-registered with a regulator, the aircraft can be taken out of the country by a lessor and leased to another airline.
"One of the proposals before the banks, before the airline suspended operations, was to operate Jet Airways with just 21 aircraft. And that is what a new owner may do. It will be a much smaller Jet Airways that one would see if it get backs to flying," said a senior executive at an international airline.
Best of talent
Being a better paymaster than its peers in the industry, Jet Airways has had some of the most experienced pilots, engineers and ground staff.
While the exact number is not known, industry observers say it has already lost about 500 of its pilots to its rivals. SpiceJet said last week it had hired 100 pilots from Jet Airways and was open to induct more. SpiceJet is holding recruitment drives for pilots later this week in Delhi and Mumbai.
Internally, Jet Airways employees have been advised to look out for opportunities. And, a smaller workforce will help the airline. But, this may become a challenge once it resumes operations, especially if it loses its captains. The Indian aviation sector, including companies like IndiGo, is facing a severe shortage of captains.Given the new reality and ground situation, bidders may ask Jet Airways lenders to take a bigger haircut. The airline has debt of nearly Rs 9,000 crore.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.