HomeAviationOpinion: Here’s why I believe Jet Airways won’t be flying again

Opinion: Here’s why I believe Jet Airways won’t be flying again

The odds aren't in their favour and time is of the essence

I’ve already talked about the reasons behind Jet Airways’ demise and why the airline struggled to churn out profits. India is the world’s fastest-growing aviation market and yet, an airline with over 25 years of legacy couldn’t make it. The biggest question right now is, will it be able to make a comeback?

Vinay Dube, CEO of Jet Airways has confirmed that the management is doing everything they can to revive the airline. Technically, the company has stopped flight operations temporarily because there’s no money left and vendors aren’t keen on extending a credit line any further.

I’ve been following the Jet Crisis since last year and given the pace at which things have advanced is disappointing. For more than two quarters, lead promoter Naresh Goyal failed to find a new investor. Even though a banking consortium did manage to get him out, even they aren’t interested in extending interim funds.

Picture by Utkarsh Thakkar

Why aren’t there any takers for Jet?

  • Jet Airways has a staggering debt of more than INR 11,000 crore. It owes repayments to a host of Indian banks and two foreign banks. More than INR 3,000 crore is owed to various supporting vendors. Anyone interested in taking over the airline needs to pay off these dues first. Additionally, a separate infusion of funds will be required to kickstart operations and send out salaries to its employees. Interim funding of INR 1,500 crore will just mean extending the funeral by a couple of months.
  • Keep in mind, even if an investor pumps in money and clears the debt, the only thing they’ll be acquiring is the Jet branding, maybe slots, and employees. There are no actual assets attached like aircraft or infrastructure. Even what’s left of it is slowly diminishing because the competition is moving faster.

  • MoCA has already started distributing Jet’s slots to competing airlines to make up for capacity constraints in the coming months. The slot allotment is being termed “temporary” or for “three months” right now, but if Jet doesn’t make a comeback soon, consider them to be lost forever. Slots are the most valuable commodity at airports like Mumbai and Delhi, and the competition will try everything to snatch them.
  • To continue its dominance on slots, Jet needs aircraft. And, lessors have had enough. EXIM Bank of the US is eyeing seizure of Boeing 777 aircraft, a few Airbus A330 are already being deregistered, and SpiceJet plans to induct 40 of their Boeing 737. What will be left to fly?
  • Even international operations are going to be hard to restart since long-haul aircraft are slowly leaving, and precious slots at airports like London were leased from Etihad. These operations require even more capital to run and codeshare agreements are going to be hard to fulfill. These are a precious asset for the company and partners won’t be open to a handicap Jet that lacks stability.
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  • Employees too have finally started jumping ship. Spicejet is actively poaching pilots, cabin crew is trying to find alternatives, and literally, everyone is scrambling to find a life vest. Every resource that the airline once had, is slowly slipping away.
  • The company is a sinking boat without a captain at the helm. Goyal is long gone and successfully transferred all the responsibility onto the exposed banks. The airline requires a new vision, improvised business plan, and someone capable enough to pull strings when required. Spicejet was saved by Ajay Singh, IndiGo has skyrocketed thanks to Rahul Bhatia and Aditya Ghosh, and Vistara has Sanjiv Kapoor as well as SIA experts. At the end of the day, the banks simply want to remove or reduce their exposure and the airline is nothing but a non-performing asset.
  • Lastly, being a full-service carrier, Jet needs to compete against cheaper available options. It hasn’t been able to sustain till now and many question whether there’s enough demand in the market when Air India and Vistara also offer a similar product.
Picture by Utkarsh Thakkar

These are just a few factors that give potential investors cold feet. Also, every single day the airline doesn’t operate flights, it’s losing more resources. A month down the line, there will hardly be anything left to salvage. Like I’ve said, the competition is brutal, and moving faster than ever.

The bidding process is expected to be completed by May 10. If no buyer emerges, there is a possibility of vendors and operational creditors dragging it to the bankruptcy court. So far, four entities – Etihad Airways, TPG Capital, Indigo Partners, and National Investment and Infrastructure Fund (NIIF) – have been shortlisted for the bidding process.

I got in touch with investment bankers to undertstand their take on a beleagured investment like Jet and they confirmed an investment of at least INR 15,000 crore will be required in the beginning. The margins are slim and hugely depend on global crude oil rates, hence, also an extremely risky investment. A potential investor was a possibility in 2018, but Goyal’s demands closed out the option. By the time he was out, it was too late.

What’s my take on Jet’s future?

Up till now, I’ve held a positive outlook on Jet Airways. But with every day passing, the future seems dark. A government bailout is possible via NIIF (India’s first sovereign investment fund), but why will they?

The government is already staring at a staggering debt crisis at Air India and it has no option but to bail out the flag carrier. Nobody wants the taxpayers to rescue another airline. Even the timing is splendid, the banks can continue dragging their feet for a few more weeks, and elections are done.

The government wouldn’t want the airline to officially close down while general elections are going on, the facade of a bidding process gives them a much-needed buffer. Jet has already stopped operations, within a month and half the announcement of a permanent closure won’t hit as hard as it should.

Picture by Utkarsh Thakkar

Everyone’s looking at an uncertain future and trying to create a backup plan for themselves. This includes the employees as well as various investors. It’s a classic cool down tactic. Institutional investors have long given up on Jet’s stock, retail ones are still hanging on. But, we’ve heard the same set of probable investor names in the last six months, and nothing has come to fruition.

I feel for the staff of Jet Airways, they’ve worked months and months without pay and are going through another artificially generated downward spiral wherein the lead culprit chills in London. This industry has always been volatile (especially in India), and I can just hope they make it through and find better opportunities soon.

Just like every other industry, the incumbent often loses sight of the oncoming disaster. RCom never saw it coming, Suzlon never saw it coming, HCC never saw it coming, and even the Lehman Brothers missed it. The void that’ll be left behind will soon be filled up by someone new.

Disclaimer: This is an opinion article and hence the views expressed are that of the author.

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1 Comment

  1. Sankaran
    April 29, 2019 at 9:02 AM — Reply

    This is what everybody says; so you are not saying anything new. Why don’t you say why Jet Airways will fly again; that may be useful.
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