Wednesday, October 21, 2020

Jet Airways needs $4 billion to secure its future in the skies

 After staying grounded for 18 months, there's a sudden ray of hope for Jet Airways. A resolution plan submitted by a consortium of UK-based Kalrock Capital and UAE-based Murari Lal Jalan has recently been approved by the Jet's committe of creditors (CoC) by a majority of votes. Though the details of the plans have not been disclosed publicly, there are reports that lenders will be taking a haircut on their dues as the consortium has offered a payout of some Rs 866 crore.

As per reports, the resolution professional (RP) for Jet Airways received claims worth Rs 40,000 crore from different creditors out of which Rs 15,525 crore were approved. With just about Rs 866 crore on offer, creditors will have to write off a significant part of their debt unless there are plans by the (probable) new owners to offer equity to the creditors in the new company.

Experts, however, remain sceptical of the entire process. This is the fourth time Jet Airways' RP had requested bids for the airline, after three previous rounds failed to elicit desired responses.

"It's just a baby step to acquire the carrier. The bigger task is to set it up again and become operational," says Mark Martin, CEO of Martin Consulting, adding that besides the initial pay off to the creditors, the new owners would need at least $4 billion to operate the airline in the years to come. "I am expecting at least $1 billion of initial working capital requirements that includes expenses like getting planes from the lessors. Then, airlines typically take 5-7 years to break-even, and till then, the airline would need funds of about $3 billion. We will have to see if they can bankroll these expenses," he says.

21/10/20 Manu Kaushik/Business Today

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