Jet Airways revival will be a challenge for new owners
The National Company Law Tribunal has cleared the revival plan for Jet Airways, while also denying the new owners their claim to the airport slots that the airline had held prior to its cessation of operations in April 2019. It is exactly two years since bankruptcy procedures started for Jet Airways. Under normal circumstances, it might be considered that this is too long — especially given the timelines built into the Insolvency and Bankruptcy Code. On the other hand, the special circumstances of the pandemic mean that even a faster process might not have meant that the airline could resume operations before 2021. The new ownership remains somewhat opaque: It is a consortium led by Murari Lal Jalan, from a Ranchi business family who is now based out of Dubai, and has interests in real estate in countries including Brazil and Uzbekistan. Partners in the deal are Kalrock Capital, led by the German-born Florian Fristch, who is based in Switzerland — but, under current regulations regarding control by Indians, it is Mr Jalan who has to own the majority of the airline.
Regardless of the ownership, the task of revival is difficult, especially since the tribunal has made it clear that its access to Jet’s old slots and bilateral landing rights is dependent upon the goodwill of regulators. Mr Jalan has therefore sought to insert Jet’s revival story into the broader desires and designs of the Union government — saying on Twitter that the airline’s business plan would depend upon getting “flyers from tier 2 & 3 regions … seamless access to international travel” so that “Delhi, Mumbai, etc. will no [longer] be the only starting points for international travel for Indians, but just stop-overs”. If this is in fact the new owners’ plan, the broader bet will presumably be that growth in Indian overseas travel will come from Tier 2 and Tier 3 cities — and it will be sufficiently insensitive to the price the travellers will be willing to pay for only a single stopover rather than, as is the case, two — with one usually being in the Gulf. Even if this macro bet works out, the airline will need bilateral rights to be restored by the regulators and landing slots to be provided by airports — though it has been reported that Delhi and Mumbai airports, at least, are likely to have free slots to allocate to Jet given the pandemic.
While Jet does indeed benefit from name recognition and even some loyalty from an existing customer base, the two-year gap since it shut down means that the new owners will essentially have to build the airline from the ground up. It is unclear, for example, how it will revive old code-shares between Jet and airlines like Air France/KLM and Delta, as well as the possibility of joining their SkyTeam alliance. It will also have to rebuild a loyalty programme — crucial for any full-service airline — given that Jet Privilege Private Ltd has been a separate entity since 2013 and continues to be controlled by Jet’s erstwhile partner, Etihad. Globally, investors have been bullish about airline stocks as travel haltingly resumes after the pandemic. But the fact remains that the environment in India is not just difficult at the moment, but that full-service airlines in India have historically struggled. Jet’s revival may be good news, but it is too soon to celebrate.