Jet Airways may take a year to start flying again after revival plan approval – The Economic Times

Clipped from: https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/jet-may-take-a-year-to-start-flying-again/articleshow/83765810.cmsSynopsis

The new owners of Jet, a consortium of UK-based investor Kalrock Capital and Gulf businessman Murari Lal Jalan, will need to seek several approvals and clearances before it takes to the skies again.

Jet AirwaysNSE 4.98 % may take around a year to take to the skies again after a bankruptcy court approved a revival plan for the grounded private-sector carrier that was once the leader in the Indian market.

The new owners of Jet, a consortium of UK-based investor Kalrock Capital and Gulf businessman Murari Lal Jalan, will need to seek several approvals and clearances before it takes to the skies again.

These include the air operator’s certificate, security clearances, flight slots and bilateral air traffic rights of Jet that have either lapsed or been reallocated to its peers. What’s more, it will have to apply afresh for arrival and departure slots.

“It will be very difficult,” said a person close to the development. “Retaining the Jet brand and company structure will possibly help the new owners get security clearances etc., faster than usual. But taking it back to the skies won’t be easy at all. I also think the money being invested isn’t much. It will most likely start with 4-5 airplanes and then try to scale up gradually,” said the industry official.

Furthermore, the macro environment isn’t the best for an industry like commercial aviation.

“The aviation industry has been impacted the most in this pandemic. Demand has revived somewhat in the third and fourth quarters of FY21 but has been hit again because of the second Covid wave,” said Kinjal Shah, vice president at ICRA. “In such a scenario, a new airline will only increase the competitive intensity, which won’t be beneficial at all for the industry.”

But some others were more positive.

“The court order is a massive clean-up – surprisingly- and will allow the new promoters to develop a viable business case subject to a significant capitalisation,” said Kapil Kaul, CEO, South Asia at CAPA Centre for Aviation.

Kaul also said it wouldn’t be challenging for Jet to secure slots as many are lying unused due to low demand.

Jet stopped operating on April 17, 2019. A show-cause notice was sent to it by the Directorate General of Civil Aviation (DGCA) for suspending its air operator’s certificate. That suspension was stalled because of the corporate insolvency proceedings against it at the National Company Law Tribunal (NCLT).

The new owners of Jet will now be assessed for substantive ownership and effective control, and its directors and key personnel would require a security clearance. Operational aspects, including training and maintenance, will also have to undergo a complete recertification process.

When Jet stopped operations, the DGCA had reallocated its flight slots to peers temporarily. Jet’s counsel had appealed in court that the insolvency proceedings protected these slots, and they should come back to Jet. The NCLT quashed this appeal.

The Kalrock-Jalan consortium will hold close to 90% of Jet while financial creditors will primarily hold the rest. The consortium aims to invest Rs 1,375 crore into Jet. It will pay Rs 1,183 crore to creditors, employees and workers.

Jalan had told ET in an interview that the consortium aims for Jet to have 25 new planes by the end of its first year of operations, which many industry experts have called ambitious. According to the plan, it aims to build a fleet of 120 planes in 5-6 years, which experts have said is unlikely.

The money to creditors, employees and workers will be paid from the consortium’s internal accruals, sale of assets of the defunct airline and money from cash-flow once its operations start. Workers and employees will get their money (Rs 113 crore against a claim of over Rs 1,200 crore) in the first 180 days, while financial creditors will get theirs (Rs 1,010 crore against Rs 7,454 crore) in tranches in five years, according to the resolution plan.

Operational creditors—primarily customers and travel agents—will get up to Rs 15,000 or credit for future travel as a refund for tickets that got cancelled as Jet grounded operations in April 2019. The operational creditors will get Rs 9 crore as against a claim of Rs 6,658 crore.

The company will initially employ only 50 employees from a pool of over 200 that was part of the asset preservation team to take care of planes etc when the airline was grounded.

However, a total of 3,681 employees on payroll will be shifted to a ground-handling subsidiary called AGSL, which will be demerged from the company. The employees will form a trust which will get 0.50% in the airline.

There will be other expenses like Rs 275 crore of pending airport fees for parking Jet’s grounded aircraft.

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