What Will Jet Airways’ Buyer Actually Get?

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After a year and a half of wrangling, India’s Jet Airways finally found a buyer last week. It was a long time coming. The new owners, a consortium including London-based financial advisory and asset management firm Kalrock Capital, and UAE-based business tycoon Murari Lal, have big plans for the reborn Jet Airways. But there’s not a lot left of the original Jet Airways. The airline has gone from nearly 120 planes to just 12. So what are the new Jet Airways owners actually getting for their money?

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Jet Airways has new owners, but what’s left of the airline? Photo: Getty Images

What’s left at Jet Airways?

Jet Airways collapsed in April 2019, long before the current travel downturn. After a run of losses, the airline basically ran out of money. It owed more than US$1 billion and could not pay its day to day expenses.

At its prime, Jet Airways was operating around 120 aircraft, although that number did fall away before the collapse. The majority of Jet Airways’ planes were leased. Lessors simply swooped in to take back what was theirs.

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In addition to aircraft, another key asset for any airline are its landing slots. Jet Airways held valuable slots not only in India but at airports around the world. Almost immediately after its collapse, India’s aviation regulator, the Directorate General of Civil Aviation (DGCA), began redistributing some of Jet Airways’ slots in key Indian airports. Over the course of last year, Jet Airways also surrendered some of its slots at European airports such as Amsterdam and Heathrow.

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Jet Airways has retained two A330 aircraft. Photo: Venkat Mangudi via Flickr

Did Jet Airways hold onto critical slots?

But earlier this year, just as the wider travel downturn began to impact, New Delhi based Simple Flying writer Pranjal Pande said all was not lost for Jet Airways when it came to slots. While many had gone, some slots at international airports remained intact. More critically, key slots at Mumbai, Delhi, Bangalore, and Hyderabad airports remained secured until October 2020.

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It may be a coincidence, or it may not be a coincidence, but it’s a fortuitous piece of timing. The new owners can now take the remaining slots up, nice and easy.

In a nutshell, Jet Airways’ new owners will pick up Air Operator’s Permit, a slice of the profitable InterMiles frequent flyer program, six Boeing 777-300s with an average age of 13.3 years, three Boeing 737-800s with an average age of about 12 years, two Airbus A330-200s, airport slots, strong brand awareness, and significant goodwill.

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What’s that bag of airline swag worth? The consortium paid nearly US$136 million for Jet Airways. But experts believe this is just the tip of the iceberg. Jet Airways will need significantly more cash to take off again. More capital will be needed and soon.

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Jet Airways has kept six Boeing 777-300s. Photo: Nabil Molinari via Flickr

Jet Airways faces challenges going forward

The relaunched Jet Airways will take on some previously incurred debt and face the high costs of restarting an airline, accompanied by low demand on India’s key domestic airline trunk routes.

“The size of Jet Airways’ operations, once restarted, will depend on the portion of the money infused by Kalrock Capital and partners that will be used for operations after paying off various creditors,” a Jet Airways source told The Hindustan Times today.

“An investment of Rs 1,000 crore is good enough to start a medium-sized airline like Azul from scratch. But, when the airline has a debt obligation, one would assume that a much higher investment is needed,”

The new owners of Jet Airways face formidable challenges. But if they start small and keep costs low, they may make a successful go of it. They got some planes, slots, an operator’s permit, and a lot of goodwill. It all comes down to their ability to convert these assets into profit. Twelve months down the track, we’ll have a better idea of whether Kalrock Capital and Murari Lal got some bang for their buck.

What do you think? Will the new Jet Airways succeed? Post a comment and let us know.

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