• FIC Hansraj

Jet Airways 2.0: The Road to Runway

This article is an excerpt from the Sept-Oct 2021 edition of the Finance Gazette Volume III. Click to read the whole edition


It was April 2019 when the burden of debt became too heavy for India’s oldest private airline, Jet Airways. After being in operation for 26 years, the airline succumbed to and had to bid farewell to the skies to ground its entire fleet. The airlines that used to glorify the skies and flew long-haul routes to Europe, North America, Abu Dhabi, and Hong Kong had to temporarily shut down for a reason that is no rocket science: lack of funds. Before the disaster struck, Jet Airways operated 600 domestic and 380 international routes. The airline was unable to secure emergency funding from any source, including the lenders led by the State Bank of India (SBI).

Jet Airways revival plan | FIC Hansraj Refined
Jet Airways revival plan

The news came as a shock and was upsetting to many. First and foremost, the fate of the 22,000 strong staff comprising 16,000 direct and 6,000 contractual remained undecided. These were the people directly affected by the shutdown but there were a lot of stakeholders who didn’t want the airline to rest its wings and no wonder the hashtag, “# SaveJetAirways” was trending on social media. There was a horde of people who had grown up with Jet Airways and had taken their first flight with the airlines. Now given this moment of crisis, what remained to be seen was whether Jet Airways would be revived. Will it have a final nail in its coffin or will it see a second life?

This chronicle which was only turning sadder as the months passed by saw hope of a fresh start in October last year. A consortium of investors, comprising UK-based asset management firm Kalrock Capital and Dubai-based businessman Murari Lal Jalan took over Jet Airways. However, the most crucial news came on June 22, 2021, as the National Company Law Tribunal (NCLT) approved the consortium’s resolution plan. The consortium plans to have a total cash influx of Rs 1,375 crore, out of which Rs 475 crore will be used to pay off the stakeholders and financial creditors. The remaining 900 crores would be used for working capital requirements and capital expenditure for kick-starting and smooth functioning of the airlines.

The market took this news in good stead as the share price of the airline locked in a 5% upper circuit on the day the resolution plan was approved. The price was quoted at Rs 99.45, up by 4.96% on the BSE. The Tribunal gave the Directorate General of Civil Aviation (DGCA), which is the industry watchdog and the country’s aviation ministry 90 days to allot slots to the airline. All of the 700 timeslots that allowed it to land and take off from the busiest airports in India had been allocated to other airlines after it was grounded. The prospects of getting the historical slots back are bleak so if one delinks the earlier slots, Jet Airways 2.0 would ultimately be a startup airline.

Talking about the revival plan, the Jalan Kalrock Consortium has gone on to say that they aim to restart their domestic operations in the first quarter of 2022 and the international flights travelling short distances in the subsequent quarter. However, this road to recovery isn’t as rosy as it seems to be. Several thorns are still strewn. One of the key obstacles that we have already talked about is getting the old slots back which have been taken over by rivals like IndiGo, SpiceJet, and Air India. The fact that Jet Airways would probably not be able to secure preferential treatment at the major airports is a big concern.

One of the new developments in this entire saga is the case filed by Punjab National Bank before the NCLAT that has stalled the revival plan. Punjab National Bank had earlier approved the resolution plan but has now presented a hurdle by bringing in fresh litigation for the airline. Moreover, two Jet Airways employee unions have raised concerns over retirement benefits and pending dues under the resolution plan. NCLAT has agreed to hear these claims. Going ahead, this web of litigation can prove detrimental for the airline as that can impact the confidence of the new owners and can restrain them from making a sizeable investment in the airline.

This trajectory reminds us of the problems that plague the aviation industry in our country. The likes of Kingfisher Airlines, Air Mantra, Air Pegasus, and Air Costa depict that Jet Airways is not the first airline to shut down its operations due to mismanagement. Despite the increasing passenger count and aircraft size, the aviation sector has proved to be a grim space due to fluctuating fuel prices. Fuel expenses constitute about 40% of an airline’s expenses and thus revenue takes a hit when the fuel prices rise. The depreciating rupee means that the maintenance and refuelling expenses skyrocket for the Indian airlines travelling to overseas destinations. The price war due to tough competition doesn’t allow any Indian airline to own a substantial market share. Thus, it is difficult to raise prices without losing customers. These impediments are here to stay and only time will tell if Jet Airways can capitalize on the ray of hope to offer its stakeholders a turbulent-free flight.



Author: Mayank Kedia

Illustration by: Harsh Agarwal