Jet Airways 2.0: Boarding cleared, take-off to be scheduled

A bankruptcy court in Mumbai recently approved a revival plan for grounded carrier Jet Airways paving the way for the airline to take wings again under the new owner-Kalrock-Jalan Consortium- after protracted quasi-judicial proceedings

A bankruptcy court in Mumbai recently approved a revival plan for grounded carrier Jet Airways paving the way for the airline to take wings again under the new owner-Kalrock-Jalan Consortium- after protracted quasi-judicial proceedings. This is the first time in the country’s aviation space that an airline is set to be revived after shutting down. None of the carriers in the past, including Kingfisher Airlines, could get an investor to restart operations.

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Founded by ticketing agent-turned-entrepreneur Naresh Goyal about three decades ago, the once premier carrier shut down operations abruptly on April 17, 2019, due to the inability of then promoters - Goyal and Etihad Airways—to put more money in Jet Airways.

Later in June that year, bankers dragged the defaulter airline and its promoters to the National Company Law Tribunal (NCLT) to recover their dues. Meanwhile, Jet Airways’ slots or the available schedule time of arrival or departure of its flights at various airports were given away to other domestic airlines.

After almost two years of proceedings at NCLT, the revival plan submitted by the consortium of UK-headquartered Kalrock Capital and UAE-based Murari Lal Jalan finally got the go-ahead. The tribunal, however, has made it clear to Jet Airways that the company has no rights over the slots and the decision will rest with the Directorate General of Civil Aviation (DGCA).

The Bench has given 90 days to implement the revival process. The consortium has proposed a total cash infusion of ₹1,375 crore, including ₹475 crore that will be used for payment to stakeholders, including financial creditors. Additionally, an amount of ₹900 crore will be invested for capital expenditure and working capital requirements for the smooth functioning of the airline, as per the plan

A seven-member monitoring committee, including members appointed by the Consortium and the lenders, will soon start managing the day-to-day affairs of the airline till the resolution process is complete.

Before its abrupt closure, Jet Airways had one of the most experienced and efficient workforces including pilots, engineers and cabin crew, in the industry. Even today, there are around 3,500 employees still attached to the airline.

However, a lot has changed since 2019. The pandemic has altered every business plan and strategy of airlines globally. In the changed situation, the moot question is how sustainable will be the operations of Jet Airways 2.0 at a time when the passenger demand is at the lowest ebb and it is difficult to predict the time the industry will take to return to pre-Covid levels.

“ Jet 2.0 will start with a clean slate. It will be debt-free and will have no legacy baggage. Certain factors like low lease rentals of aircraft, reduced fuel prices, growing airport infrastructure in India will be aiding factors (in its revival). Besides, being a full-service airline, it has an opportunity within the business and high-end leisure travel space,” said Amit Kelkar, vice-president, Jet Airways Aircraft Maintenance Engineers Association (JAMEWA).

Moreover, 12 aircraft in the fleet including the wide-bodied ones still in the possession of the grounded airline will also help it take off the ground again, he said.

“This is for the first time in the history of Indian aviation that a revival of an airline is in offing after getting grounded. However it’s been more than two years now, and the road ahead does not seem to be that easy,” says a former senior airline executive.

On June 22, the consortium said it will decide on the next steps after receiving a written order from NCLT, and emphasised that it will work with the aviation authorities to see the airline taking wings again.

The aviation industry is currently struggling with consumer confidence and demand. “Vaccination and opening of borders will certainly speed up domestic travel, which needs to restart and there is a lot of pent up demand”, said Jyoti Mayal, president, Travel Agents Association of India (TAAI).

Noting that domestic tourism will certainly be a driving force and hoping the situation gets better in six months, Mayal said, “Taking the aviation industry perspective, it is not going to be easy for the airline on the road ahead... The demographic post-Covid 19 is changed and Jet airways will need to adhere to all the needs of a changing environment.”

Adding, “Also, all domestic airlines are planning to adopt newer strategies going forward, so they (the new promoters) will need to do more so.”

Echoing similar views, an aviation expert on condition of anonymity said, “You can’t set up an organisation based on a legacy and traditional cost-structure. Such a cost structure will not allow you to survive in the present situation.”

He added, “At a time when airport charges and fuel costs are increasing and there are no passengers, anyone who is brave enough in this period to start will have to be smart enough to maintain a very low-cost structure by way of smart negotiations on all cost fronts. Success will be defined by how smartly you get low and technology-enabled costs along with a well-thought-out risk mitigation strategy. That is something that every airline new or existing will have to see.”

With aviation being a business that can come down to the ground in a day due to certain risks associated with it, he said Covid-19 is another major risk now with the potential to bring down your load factor to zero from 80% in just one day and is now added to the business risk list.

According to Mayal, Jet Airways will have to establish a lot in the next six months from negotiating new contracts and re-establishing the operational front. “Though the owners are new, they will need to gain consumer and industry confidence to sustain. It is not going to be easy,” she said.

Asserting that the slot issue is unlikely to come in the way of revival Kelkar said, “Many slots remain unutilised in today’s (Covid-19) situation. Even as a new entrant we can have access to many slots in the common pool.”

According to Kelkar, new airports and operationalising of new runways will create new slot availability. Besides, there could be options in plus / minus 15 minutes space.

“The pandemic circumstances, although unfortunate for the society, has created a level-playing field for both Jet Airways and the existing players. The industry is going through a reboot today and the coming 6-9 months will open up a few slots as the capacity will get back to the pre-Covid levels, but not in the same ratio among carriers as it used to be pre-Covid, said a former airline executive who did not wish to be named.

The executive on condition of anonymity said whoever can add capacity now may be able to get some good slots.

“Getting slots in Mumbai is a big question but other cities will see a shift in capacity share from one carrier to another (could be existing or new), he said. “The current situation has saddled balance sheets with liabilities that will take a long time for carriers to do away with. The cash-rich have burnt a lot of cash that has considerably brought down their reserves. The timing (of revival) therefore couldn’t get any better.”