Recent government decision to give away approximately 440 lucrative flight slots at the Delhi and Mumbai airports is making shortlisted bidders question the point of investing in Jet Airways. While the ongoing stake sale process was the airlines' last hope to regain its wings, latest government decision to give away its lucrative flight slots may have thrown a spoiler in the works. The grounded airline had boasted as many as 440 slots at the Delhi and Mumbai airports, among the busiest in the country. Authorities are in the process of allocating these slots to other airlines on an interim basis, amid efforts to increase capacity to meet peak season traffic and rationalise spiralling airfares.
The development is, however, scaring away the few investors that had submitted expressions of interest for a chunk of Jet Airways. People in the know said all shortlisted bidders, Etihad Airways, Jet's largest shareholder, TPG Capital, Indigo Partners and National Investment and Infrastructure Fund (NIIF), who have to submit their final bids by May 10, are questioning whether there is any value left in the airline at all. A source said, “It has been said they are being given on a temporary basis and will be given back once Jet resumes operations. The investors aren't sure how easy it will be to regain those slots. Planes are being leased out too.” He explained that “many critical questions” remain unanswered, starting with the status of the debt-to-equity swap revival plan proposed by the bank consortium last month. He added, “The lenders' reluctance to give any interim funding to Jet casts serious doubts on their intentions.”
Civil Aviation Secretary Pradeep Singh Kharola said the vacated slots, of which 280 are at Mumbai and 160 at Delhi, would be allocated to other airlines on an interim basis in a “rational, fair and equitable” manner as decided by a committee comprising officials from the DGCA, Airports Authority of India (AAI) and respective airports. The All India Jet Airways Technicians Association wrote to the aviation watchdog requesting it to immediately pause slot allocation till the bidding process is complete in order to protect the value of the company. “Otherwise we will be forced to knock the legal doors for a resolution,” the body added. However, other domestic carriers have already accelerated their aircraft induction plans and are now adding 150 planes to their fleets collectively, up from 80 planes proposed earlier. In fact, SpiceJet, IndiGo, AirAsia India and Vistara have already announced new flights from Mumbai and Delhi starting May.
Prior to recent developments, Indigo Partners had drawn up a tentative plan to invest $250 million in Jet Airways and convert it into a veritable low-fare carrier by eventually hiving off its wide-bodied Boeing 777 planes. With Jet Airways having delayed repayments of over $18 million to global lenders, including Citibank, that had financed its purchase of the 10 Boeing 777s on the back of guarantees from Export-Import (EXIM) Bank of the US, these planes are now at risk of being repossessed.
Independent aviation consultant and former vice-president at Jet Airways, Manish Raniga said, “If the sale process by SBI Capital does not yield a positive outcome, likely scenarios may include the path of the NCLT. However, it would be expected that SBI should have alternatives in place to avoid reaching NCLT.” He said this may include an alternative sale model to other investors or “some form of government intervention, although unlikely.”
The consortium of lenders, who had hoped to recover dues of over £840 million through the stake sale, are already staring at steep haircuts of 60-80 per cent post the grounding of the airline last week. Raniga said, “It would be in the best interests of lenders to wrap up the bidding process successfully rather than the alternative due to the severity of the situation.”
