Why Jet Airways stays grounded despite its rescue

After more than 25 years of operations, full-service airline Jet Airways was grounded on 17 April 2019 in the face of severe financial difficulties. The insolvency process began in June 2019 and the NCLT approved a resolution plan submitted by the Jalan-Kalrock Consortium on 22 June 2021. The airline secured its air operator certificate from the Directorate General of Civil Aviation on 20 May and has hired more than 200 employees so far. However, the airline faces a fresh turbulence as a standoff has emerged between the banks and the Jalan-Kalrock consortium over the airline’s ownership transfer.

What is the view of the winning consortium?

The Jalan-Kalrock Consortium consists of UAE-based non-resident Indian Murari Lal Jalan and businessman Florian Fritsch’s Cayman-based Kalrock Capital Partners Ltd. The consortium has deposited bank guarantees worth ₹150 crore, and says it will invest further only after the next steps of the resolution plan are fulfilled in terms of handover of the company. It says the formal handover has taken longer than expected, and has also approached NCLT for the implementation of the resolution plan. Separately, it has said that recent foreign investigation on Florian Fritsch will not impact the airline’s revival.

Where do the banks stand in this stalemate?

The resolution plan says the winning bidder must make upfront payment of ₹185 crore to banks within 180 days from the effective date. The effective date is considered as the date of fulfillment of all conditions and is believed to be 20 May. Lenders say the consortium has not paid the amount, as it has only deposited bank guarantees worth ₹150 crore.

What is the impact on Jet employees?

The consortium said it has to restructure salaries for some employees to secure cash flows. One-third of the total workforce of around 230-250 employees is set to be impacted from December. Many of the affected staff will be on temporary pay reduction of up to 50%. Around 10% of the employee strength will be on leave without pay for a temporary period. The management has not clarified till when the new measures will remain in place. It is also not clear whether the airline will hire more people for now.

What happens to the airline’s relaunch?

Jet Airways 2.0 has letters of intent in place for new aircraft as the 11 aircraft it currently owns will be sold as per the resolution plan. It also has letters of intent for engines, IT systems, ground handling services, catering, and call centre facilities. The airline was earlier expected to take off in September, but now it may happen in 2023. The NCLT hearing on 29 November is likely to provide more clarity in this respect. There is also no clarity on whether the consortium will pay the pending staff dues of ₹250 crore.