Remind me what happened to Jet....

Two years ago, Jet Airways halted operations because it ran out of cash—having spent most of 2018 posting massive losses, struggling to pay employees and facing probes for tax evasion and safety lapses. Its lenders finally refused to shell out any more emergency funds, and the last flight was in April, 2019. Then it spent months in search of a buyer. When none seemed inclined to bite—including its international partner Etihad—the airline went to the National Company Law Tribunal (NCLT) which set about finding a suitable suitor. 

The new & proud owners: Since no other airline wanted to take on Jet, the prize went to a consortium of investors. It was led by UK-based asset management firm Kalrock Capital and UAE-based businessman Murari Lal Jalan—neither of whom have any experience in aviation. London-based Kalrock Capital describes itself as a “global firm operating in financial advisory and alternative asset management,” and specialises in real estate, venture capital and “special situations”—which may be the category under which Jet qualifies lol! Jalan is a multibillionaire with investments across various areas—especially real estate—and across the world, including Russia and Uzbekistan.

Point to note: Jalan appears to be on an aviation roll. He is also close to sealing a deal to start a full-service airline and build a new airport in Uzbekistan.

Ok, so what’s the delay?

Debt resolution: At the time of its bankruptcy, Jet owed Rs 154.32 billion (15,432 crore) to its creditors. The NCLT first had to approve the Jalan-Kalrock proposal to resolve those debts. The consortium has now agreed to:

• Pay creditors, including banks, Rs 11.83 billion (1,183 crore) over a five-year period.
• Give banks a 9.5% stake in the airline, while the consortium will hold 89.79%.
• Give employees a 0.5% stake in its equity.

The plan was approved in June by NCLT—clearing the decks for Jet’s return.

Getting ready for takeoff: There’s also a lot of groundwork involved in getting the airline back to work:

“[I]t will have to obtain various approvals and certifications, including an air operator’s permit, security clearances for the new owners, airworthiness of planes, permission to import planes, etc. The induction of pilots and their refresher training could take two to three months if the new owners rehire old employees. Similarly, cabin crew and engineers would also have to undergo refresher training.”

The proposed timeline: On Monday, Jalan-Kalrock announced that it will restart domestic operations by the first quarter of 2022, and short-haul international flights by the third or fourth quarter.

Still an issue: Employees of the airline are unhappy with the plan. The company owes hundreds of them anywhere between Rs 3-85 lakhs each. And the consortium has only offered to pay Rs 23,000 per head, and a total of Rs 52 crore—which the unions rejected. The tribunal has agreed to review the employees’ claims.

So will it be like the old Jet?

Not entirely—and certainly not at first.

One: The consortium is clear that Jet will remain a full-service airline—and not take on a budget avatar. And its brand, logo, uniforms etc will also remain the same.

Two: Its headquarters will move to Gurgaon from Mumbai—where it will still maintain a significant presence.

Three: It will resume domestic operations with a fleet of smaller narrow-body planes—and operate on 20 routes. The plan is to lease more than 50 aircraft in the next three years and more than 100 in five years. Point to note: Before the airline shut down, it operated 600 domestic and 380 international routes.

The big ‘But’: The biggest obstacle in recreating Jet’s old magic: airport slots—which are time-specific landing and take-off rights at various airports. Soon after Jet shut shop in 2019, the aviation authorities redistributed its 800 slots among other airlines. However, they promised that Jet would get them back once it resumed business—and this reallocation was purely “temporary.” 

But come 2021, the government is singing a new tune, claiming “there can’t be any automatic revival of approvals granted to Jet airways”—and that slots now given to other airlines cannot be “withdrawn from them without any legitimate basis.” Meanwhile, the Jalan-Kalrock consortium says reviving the airline is pointless without the coveted time slots.

Ray of hope? Back in June, a senior government official told The Hindu:

“The Airports Authority of India has said that it does not have a problem in allotting new slots… Delhi airport is willing to give 15 departure and 15 arrival slots and has said that more slots will become available after its fourth runway is ready. Mumbai airport, too, is willing to discuss the matter with the new owners. Availability of airport slots is a non-issue today as airlines are not able to operate flights on all the slots allotted to them because of a dip in travel demand.”

Point to note: Basic slots won’t cut it for Jet. For the airline to recover its lost glory, it will have to get back its most prized airport slots—including the 450 premium ones in Delhi and Mumbai. Also: it will be facing new competition from a revived Air India—which is up for sale and now has two big suitors, Tata Sons and SpiceJet founder Ajay Singh. And there is no doubt that juicy airport slots will be thrown in by the government to sweeten this deal.

The bottomline: The good news is that Jet will stage its comeback when the worst of the pandemic will be behind us (we hope!). The bad news is that it is entering a notoriously cash-intensive industry that is grappling with crippling losses. Aviation experts forecast $8 billion in total losses for Indian airlines over two years of the pandemic—and estimates that airlines will need almost $5 billion of capital infusion just to survive.

Reading list

The Hindu has a very good explainer on the resolution plan. Indian Express looks at the challenges awaiting Jet 2.0. Quartz has more on what’s new about this upcoming avatar. The Morning Context (paywall) reports on the government’s U-turn on airport slots. Also a good read: This 2019 Forbes feature on the fall of Jet and its founder Naresh Goyal.