Landing slots are an important intangible asset for an airline
The tussle over the historical slots of Jet Airways between the Kalrock-Jalan consortium and the Directorate General of Civil Aviation came to the fore at the debt resolution hearing at the NCLT on Thursday, with both sides hardening their position.
Landing slots are an important intangible asset for an airline, and it often costs a lot of money to grab a premium slot. Jet Airways had one of the most premium slots available at metro city airports in the country.
Post its temporary grounding in April 2019, Jet’s slots were allotted to other players.
Senior counsel Ravi Kadam, who appeared on behalf of the winning bidders-a consortium of Murari Lal Jalan and Kalrock Capital, appraised that “State Bank of India, the lead lender of Jet Airways, had written to the Ministry of Civil Aviation on April 12, 2019, requesting the protection of the rights of Jet Airways’ slots. Jet grounded its operations on April 17 that year, in the same month, MoCA Joint Secretary responded stating that the slots were allotted only on a temporary basis, and not on the basis of historicity”.
He further explained that on June 20, 2019, the CIRP had commenced. As per the law, a status quo is supposed to be maintained on all assets – tangible and intangible; licences, among other things, are frozen till such time when the CIRP is complete. He argued that by this virtue, the slots, too, were an intangible asset of the airline. “Though it may belong to the nation, the said the ‘right to use has been given to an airline, and that needs to be maintained.” He cited examples of NCLAT judgments where spectrums were considered an intangible asset for a company.
Then he brought up the fact that on multiple occasions after that, too, including in response to questions raised in the Lok Sabha and Rajya Sabha, Minister of Civil Aviation, Hardeep Singh Puri, had said that the slots had been allotted temporarily and not permanently. Singh had also stated that once a business plan was proposed, it could consider re-allocating the slots to the winning party.
“It was not until June 2, 2021, that in its affidavit, the MoCA and DGCA have said that the historicity of slots is dependent on ‘use it or lose it’ basis,” he said. The lawyers on behalf of Jet Airways added that it was prudent that the slots be given back to the airline, else the only option was liquidity “because then it doesn’t make sense for any bidder to buy an airline just for its name”.
Senior counsels appearing on behalf of DGCA and MoCA said that several airports in India had agreed to give priority to Jet Airways. However, some airports such as Delhi and Mumbai have a crunch on slots, hence assurity on those is difficult.
Shyam Mehta argued that that as per the resolution plan, Jet Airways will start with only 6 to 13 aircraft in the first phase, gradually escalating its operations over the next three years.
“It is unfair for other airlines to not have the benefit of being able to use those slots, despite having the capacity and the bandwidth to operate on them,” he argued on behalf of the government.