The approval of a revival plan for the grounded Jet Airways may come as a relief to its 4,000-odd employees, but the road to recovery is going to be a long one. The full-service airline operated its last flight on April 17 last year and later became insolvent in June after being in service for 25 years. It had run out of cash and was unable to secure any emergency funding to remain a going concern.
The airline’s lenders have now accepted a bid of 10 billion rupees (US$ 136 million) by a consortium of UK-based Kalrock Capital and UAE-based entrepreneur Murari Lal Jalan to revive and operate the airline. The resolution plan secured over 99% of the votes from the committee of creditors and it now needs approval from the National Company Law Tribunal.
As part of the settlement the lenders, comprising the State Bank of India and a host of other private and state-owned entities, will have to write off nearly 90% of their loan exposure. Creditors have collectively made claims of 403 billion rupees ($5.5 billion) and the resolution professionals have admitted claims amounting to 221 billion rupees ($3 billion).
Industry experts have said that the Jet Airways rescue deal is sufficient to return the airline to the skies, but its new owners will need to quickly raise more capital to turn around the airline. The high costs of restarting operations and low travel demand amid the Covid-19 pandemic and flight restrictions will pose a huge challenge.
The other challenge for Jet Airways will be reclaiming its erstwhile slots, which are currently being used by other Indian airlines. The new owners will have to approach the aviation authorities in this regard. Till late 2018, the airline was operating 600 daily departures from and within India.
Jet Airways currently has 10 aircraft in its possession in India and the consortium is expected to press them into service. The airline’s other assets include its air operator permit, a stake in a profitable frequent flyer program and brand value.
The airline was launched in 1993 by Naresh Goyal in partnership with Abu Dhahi-based Etihad Airways. Jet Airways soon became a dominant player and ruled the domestic skies for nearly two decades, till its reign was challenged by low-cost peers such as Indigo and SpiceJet.
Saddled with high debt and mounting losses, the airline defaulted on debt repayments leading to the resolution plan and eventual takeover by banks. Goyal resigned as chairman in March last year.