This is the first time that an airline has been admitted under the Insolvency and Bankruptcy Code (IBC) and the environment could well be willing to make this a model example for the success of IBC.
The Kalrock Capital-Murari Jalan consortium winning the bid for Jet Airways as part of the resolution plan is just the beginning of many steps that are needed for the airline to re-start flying! While the news created buzz that this would be a second lease of life for the airline which suspended operations in April 2019, the road remains as tough as it has ever been.
The real question for the airline to get back will be money, planes and slots! With a debt of over Rs 8,000 crore – the first ask would be to restructure the debt and ensure that it is sustainable. Times have changed and even a cash-rich airline like IndiGo has resorted to sale and leaseback along with plans to raise money. Recovery is a few years away and while the 120 plus-aircraft airline couldn’t earn enough to service its debt obligations in the hay days, the going will be much tougher with a smaller fleet and challenging market conditions.
The resolution professional has helped secure the airline’s B777s by repaying the remainder of the loan. With most planes taken back by lessor, the airline is left with a handful of aircraft which includes six B77Ws, two A330s and three B737s. The airline had also placed an order of B737 MAX8 aircraft which have been grounded since last March after two fatal crashes. Boeing could well be interested in reviving that order due to current market conditions!
There are ample B737s or A320s available in the market currently due to airlines either going down, retiring older planes to be replaced by newer ones or returning planes due to lacklustre demand on account of COVID-19.
The B77Ws are being used to carry cargo in current times, and were used by the airline to operate to London and its Amsterdam hub along with a sole flight to Toronto. Rules in India allow flying international after an airline has 20 planes and until then the big question would be how to utilise the B77Ws – too big and costly and rules don’t permit usage on international routes.
Slots and Routes
Last year, the government decided to give out slots which where hitherto operated by Jet Airways to airlines that added capacity. This saw Spicejet become the biggest beneficiary as the airline took over aircraft which earlier operated with Jet Airways and started new routes. The process for slot allocation was unique and not in line with global rules and recommendations.
The prime slots of interest and value are indeed at Mumbai and Delhi, along with international ones. The airline does not hold any slots at London Heathrow as those were leased from Etihad and transferred back to Etihad before the airline suspended operations.
Will the airline get back slots and night parking at Mumbai and Delhi? This can only be answered by the Ministry of Civil Aviation which framed rules when the airline suspended operations. Without sufficient slots at these two airports – the airline in its full-service model is unlikely to have the ability to take on the competition. As it stands today, all the slots were given out temporarily to others but there has not been any comment on whether those have been made permanent. If slots are returned to Jet Airways, one wonders what will be the fate of aircraft and operations for other airlines.
The National Company Law Tribunal (NCLT) is yet to approve the resolution plan and that would be the first hurdle. A clearance from NCLT will have to be followed up with approvals from the Ministry of Corporate Affairs and the Ministry of Civil Aviation before the process to re-start the airline can begin!
Jet Airways also has an air operating permit (AOP) for Jetlite (erstwhile Air Sahara). Can the new owner sell the AOP to a potential investor who wants to start an airline in India? In a country where Kingfisher could raise cash from the brand value, an AOP is definitely valuable! As it stands, it could take over six months for the airline to get back to business – if at all it clears all hurdles and the ever-changing market will continue to be its prime challenge, as before.
Can Jet Airways fly again? History suggests it won’t but there could be someone who could defy history and it could be Jet Airways! This is the first time that an airline has been admitted under the Insolvency and Bankruptcy Code (IBC) and the environment could well be willing to make this a model example for the success of IBC!Ameya Joshi runs the aviation analysis website Network Thoughts.