Monday, September 19, 2022

Unresolved Negotiations With Engine Makers Causing Jet Airways’ Launch Delays

Jet Airways has to iron out some issues before launching operations later this year. The airline's new owners, the Kalrock-Jalan consortium, were keen on launching the airline in September, but ongoing talks with engine and aircraft makers and previous lenders are reportedly delaying the plans.

Jet Airways (Jet) is unlikely to relaunch operations this month as it is still negotiating terms and contracts with aircraft and engine makers. The team led by the Kalrock-Jalan consortium is working hard to resurrect the airline following its bankruptcy in 2019.

Since then, it has taken numerous steps, including getting the insolvency resolution plan approved by the National Companies Law Tribunal (NCLT) in June 2021 and getting the air operator certificate (AOC) earlier this year.

However, navigating through its past baggage and finalizing aircraft and engine deals is proving to be a little trickier than anticipated. Jet's new chief Sanjiv Kapoor commented, “Starting or restarting an airline is a complex business and we want to be sure we take the time to get the best possible terms and contracts for both aircraft and engines, including maintenance contracts, as well as to receive aircraft configured the way we want them, to meet our strategic requirements and to secure our future. If that takes a little more time to get right, that is fine. As the saying goes, ‘act in haste, repent at leisure.”

According to a report by The Economic Times, Jet wants engine makers Pratt & Whitney or CFM to bear a larger share of the costs whenever an engine is replaced. It notes that new engines like P&W's GTF and CFM's Leap are replaced more frequently than their predecessors, especially in the environmentally harsh conditions in India.

An executive at an engine maker told ET,

“Negotiations have been on for weeks. Jet does want its pound of flesh.”

Another person familiar with the matter said that the contractual terms in the leasing contract would also influence those in the ultimate purchase contract for engines. Jet is probably looking at the contracts very carefully and wants to avoid a situation of having to spend more on engines than airframes.

19/09/22 Gaurav Joshi/Simple Flying

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