Jet Airways aircraft deal delay forcing us to seek alternatives: Challenge Airlines CEO

"(Initially we thought) that the issue would resolve itself quickly, since all invested and interested parties understand that aircraft like these can only deteriorate in value. Sadly, this has not been the case," Heffetz said.

Heffetz also said that Challenge Airline has plans to convert Jet Airways' three B777-300 aircraft into freighters starting in 2025 and 2026 and delays in the sale of the aircraft will only make the aircraft more expensive.

He added that once the Indian judicial system clears the purchase of the aircraft, it would take the Challenge Group 8-12 months to reactivate the aircraft and make them airworthy, so time is of the essence for the airline.

Jet Airways B777-300 aircraft taken two months ago

"It is also important to understand that as time goes by the aircraft's condition deteriorates, which means that the amount of work needed to reactivate the aircraft over and above the standard tasks that would ordinarily be needed will grow significantly and there may be a point where the cost of the exercise could be become prohibitively expensive and render the deal commercially unviable to us," Heffetz said.

Heffetz emphasised that in an insolvency resolution matter the payoff to creditors should be of prime importance.

"It is difficult for us to understand why a sale that would inject substantial amounts to the company that would enable it to progress its resolution with creditors is being put on hold," Heffetz said.

Jet Airways B777-300 aircraft

The sale of three Jet Airways aircraft was stalled in November 2022 due to disagreements among the members of the airline’s monitoring committee, the seven-member panel constituted by lenders to manage its day-to-day affairs. Apart from creditors, the committee comprises the Jalan Kalrock consortium that had been declared the winner in the bidding for the bankrupt airline.

According to sources close to the Jalan Kalrock consortium, the sale of the aircraft has been stalled as the committee of creditors (CoC), the body that represents lenders’ interests in a bankruptcy proceeding, tried to take over the sale of aircraft despite the NCLT order granting the power to the successful resolution applicant (SRA), in this case, Jalan Kalrock, to carry out the sale of the aircraft.

"The court had given JKC the power to sell Jet Airways' aircraft on the grounds that the CoC is not qualified to sell an aircraft," a source close to the consortium said.

Jet Airways B777-300 aircraft

The person added that as part of the initial plans, Jalan Kalrock was asked to table three to four options to sell the aircraft to recover dues. "But the CoC wanted to sell the aircraft in their own way and went forward with a tendering process for the sale of the aircraft," the person said.
He added that as a show of "good faith", Jalan Kalrock did not stop the tendering process in the hope that the sale would fast-track the transfer of ownership of Jet Airways.

"However, as disagreements grew between the CoC and JKC, the consortium was forced to block the sale of the aircraft," the source said. Even today, there seems to be no clarity from the monitoring committee to the buyers as to when the sale will resume.

Ace Aviation had initially moved the National Company Law Appellate Tribunal (NCLAT) in August against an interim order passed by the Mumbai National Company Law Tribunal (NCLT) in July, suggesting that either allowing or restraining the sale of the aircraft would lead to a reopening of the approved resolution plan.

However, the NCLT eventually heard the parties at length and reserved the case for judgment in late August. The insolvency tribunal is yet to pronounce the judgment. Ace Aviation withdrew its appeal to NCLAT on September 27, to wait for the NCLT judgment and pursue the appeal if need be.

Since the sale process was kept in abeyance by the lenders and the monitoring committee, it is their responsibility to clear the deadlock as it has arisen after the approval of the resolution plan, NCLT had noted in its July order.

The Challenge Group had successfully bid and executed letters of intent for the purchase of three B777-300 aircraft from Jet Airways in October 2022. These aircraft have been grounded incrementally since November 2018 and have not operated since the airline stopped operations in April 2019.
Challenge Airlines also plans to start deploying its newly converted B767 aircraft into Mumbai in December 2023. Final approvals by the local authorities for the same are expected any day now, Heffetz said.