Airlines, private equity firms renew interest in grounded Jet Airways

Potential buyers want lenders to take up to 95 per cent haircut

Grounded Jet Airways, which has been dragged to the insolvency court, could now find a fresh line-up of suitors keen to strike a bargain. Airline companies and global private equity funds have begun exploring the feasibility of bidding for Jet through the Insolvency and Bankruptcy Code (IBC) route. The caveat is that potential buyers want lenders along with lessors and vendors to take a deep haircut—as much as 90 to 95 per cent write-off on their dues.  

Lenders’ consortium, led by the State Bank of India (SBI), had on Monday decided to take Jet to the National Company Law Tribunal (NCLT) after failing to find a buyer. The case will come up for hearing on Wednesday. 

According to sources tracking the developments, SpiceJet, private equity fund TPG, and the Hindujas (which looked at Jet earlier too) may consider opening deal talks.   

Etihad Airways has already said it would “continue to constructively evaluate participation in potential solutions”, when asked whether it would bid for Jet in the NCLT. 

A top executive of a domestic carrier said, “if lenders and all other vendors settle for a 90-95 per cent write off on their dues, carriers will surely take a look.’’ He added that only at that level can it be viable as one has to put in another Rs 1,000 crore to start the business. The acquisition will also hinge on the government returning the slots to Jet--both domestic and international, the executive pointed out. After Jet was grounded on April 17, its slots were allotted temporarily for three months to other airlines.

“Lenders have taken write-offs of over 99 per cent in the case of a telecom company (Aircel), where they had a higher exposure (over Rs  20,000 crore). So, it is not at all improbable,” he added. 

Jet has a total exposure of around Rs 25,000 crore, including dues to vendors, lessors and employees. Its unpaid loans from banks are estimated at more than Rs 8,000 crore.    

On whether IndiGo would be interested in buying Jet, a spokesperson said, “currently IndiGo doesn’t have any comments to offer”. 

While SpiceJet did not respond to a query, its chairman Ajay Singh had earlier said it had looked at Jet but decided not to bid because the size of the liability was too big for a small airline. “That time it was different with the debt, payables and dues. Now under NCLT, the conditions will change,” said a source close to SpiceJet. 

Among others who could consider putting in an expression of interest, Hindujas did not comment. PE firm TPG, which was at one point in talks for Jet, declined to comment. 

Jet still owns 16 planes and once the loans and cases filed for seizure of aircraft or their de-registration are taken care of, it could fly. 

The airlines has around 9,000 employees on the rolls, with 700 pilots and 2,000 cabin crew, much more than what is needed to run a truncated airline, said another source in the know. More than anything else, Jet retains a substantial brand value, especially in international markets, the source pointed out.