Wednesday, June 23, 2021

Good news is Jet Airways will finally fly again. Now read the bad news

That’s the good news. The bad news is that it will have to go back to the regulator, the Director General of Civil Aviation (DGCA), to get clearance for time slots, a key issue on which rests the airline’s profitability.

On Tuesday, the Bombay Bench of the National Companies’ Law Tribunal (NCLT), the bankruptcy court of the government, approved a revival plan of a consortium of London-based Kalrock Capital and the UAE-based businessman Murari Lal Jalan, which means that the airline can take wings again. The NCLT has given 90 days to DGCA and the Ministry of Civil Aviation to allot slots to the airline.

Jet Airways had about 700 slots, with several of them at a prime time, ensuring that the airline remained the first choice of corporate passengers. A slot is an authorisation to either take off or land at a particular airport on a particular day during a specified time period. After the suspension of Jet Airways, its slots were allocated to other airlines with SpiceJet being the biggest beneficiary.

Meanwhile, according to reports, nearly 30 airports across the country are learnt to have offered 170 pairs of time-slots to Jet Airways but whether they are suitable for the airline remains to be seen.

However, without the prime slots, an airline can as well remain on the ground or struggle for years to become profitable again. But do the new promoters have the patience and the funds to do so? A recent tweet after the court gave its verdict more or less puts the plight of the promoters in perspective: “No landing slots in Mumbai or New Delhi. Better to fly a kite. What a wonderful show of power and influence.” Another tweet showed how bad the situation the airline is in: “Jet Airways has almost 21,000 creditors seeking claims of around $6 billion. It has lost most of its landing slots in the time it hasn’t been flying.”

The Kalrock-Jalan consortium has offered ₹1,183 crore as repayment over a period of five years to financial creditors, employees of Jet Airways. It has also offered a 9.5 per cent stake in the airline and a 7.5 per cent stake in Jet Privilege to the lenders. The airline owes more than ₹5,776 crore to the lenders alone.

Ashish Chhawchharia, partner, advisory head, restructuring services, Grant Thornton Advisory, the resolution professional appointed by the promoters, sounded confident about the revival of the airline. While he acknowledged that there are a few concerns related to the availability of routes/slots for the airlines to fly again, he stated that none of it is unsurmountable. “I am confident that the DGCA and Ministry of Civil Aviation will duly take into account all issues and give fair consideration to the business proposal for Jet’s revival. Apart from airports, such as Delhi and Mumbai, on preliminary analysis, it appears that other airports have sufficient slots whereas some are likely to expand their capacity.”

Brave words. But without the prime slots, its revival will take time, and as one of the top executives of Jet The Federal spoke to made it clear, the airline will find it hard to even break even. What might work for the airline is the huge brand loyalty Jet still commands and the addition of a listed airline entity will add to the market valuation of the airline industry. Its shares still trade at a higher price than even SpiceJet, which shows that the investors believe that its re-entry will bring order to the industry. The stock rocketed nearly 5 per cent to ₹95.45 while SpiceJet has been languishing at ₹74 a week ago. However, once the revival of Jet Airways was announced, even its shares went up nearly 5 per cent to close the day at ₹80.45.

22/06/21 Shankar Doraiswamy/Federal

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