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Despite significant challenges, there is renewed hope of the iconic Jet Airways taking off again
For nearly 26 years since it took to the skies, Jet Airways was represented by its blue and yellow ‘Flying Sun’ logo, which denoted both its professionalism and its warmth. But the airline that was first eclipsed by its collapse in April 2019, is now overshadowed by the uncertainty surrounding its revival. And each time an airline goes bust, one is reminded of the words of legendary U.S. Army General Douglas MacArthur, “I shall return!” which he told his troops and the people of the Philippines in March 1942, after fleeing the island nation following its occupation by Imperial Japan during World War II.
But alas, that has seldom happened in the aviation industry, as even once celebrated carriers such as Pan Am, Air Berlin, Swiss Airlines and Kingfisher Airlines, among others, have never returned from the dead. The dog-eat-dog nature of the industry simply doesn’t allow for it.
We don’t fly passengers... our airline partners fly passengers; we can only be successful when our customers are successful
Salil Gupte
President
Boeing India
However, when the Jalan-Kalrock consortium (JKC) won the bid for Jet Airways’ revival in October 2020, one hoped that the airline would beat the odds and be airborne soon. But what was supposed to be a major test of the country’s Insolvency and Bankruptcy Code (IBC), 2016, soon devolved into a bitter legal battle between the consortium and the Committee of Creditors (CoC) that had lent to the airline. But the Supreme Court’s July order to implement a resolution plan excluding liquidation has brought new hope for the beleaguered project. A person familiar with the ongoing internal deliberations at JKC reveals, “The consortium’s strategy to revive the airline remains unaltered. Armed with a management team, the focus remains on getting all the employees and the relevant stakeholders aligned with the vision of the new promoters to get the operations up and running.”
In the first sign of a thaw between the disputing parties, the CoC has agreed to a month’s extension for the full payment of Rs 350 crore after the consortium deposited Rs 100 crore with the lenders on August 31. Earlier, the entire payment had to be made by that date per a timeline provided by the apex arbiter National Company Law Appellate Tribunal (NCLAT) before its ownership could be transferred to JKC. This is in addition to the Rs 150-crore performance bank guarantee already provided to the lenders. “With this infusion, JKC has now invested Rs 250 crore in Jet Airways and now is only required to fund the remaining Rs 100 crore in Jet Airways by September 30, 2023, to take control of the iconic airline,” a statement from JKC said. It also claims to have incurred up to Rs 300 crore in other costs since winning the bid to revive the airline.
However, taking control of the airline is not the only hurdle before JKC. Another equally challenging concern is the payment of employee dues. Recently, the Supreme Court upheld the NCLAT’s order asking the airline to pay Rs 250 crore in outstanding provident fund and gratuity to former employees. “The consortium respects the order passed by the Supreme Court, though it is an extra financial liability since the amount was never a part of the revival plan. However, the consortium is committed to adhering to it,” assures the person, who is familiar with the developments. Former employees see this as imperative. “The prompt settlement of employee dues in alignment with NCLAT directives and ratified by the Supreme Court represents not a mere stride, but a bond towards legitimacy,” says Narayan Hariharan, former Senior VP of HR at Jet Airways, and currently advisor to the staff and officers’ association that has been fighting court cases to get the employees’ claims resolved.
[The unfolding situation] paves the way for further questions on the credibility of the revival, the business plan, and the new promoters’ capability to run an aviation business
Jitender Bhargava
Former ED
Air India
In May, the airline’s Air Operator’s Certificate (AOC), granted a year earlier, expired. In yet another setback, the airline lost the two-letter designator code awarded by the International Air Transport Association (IATA), a global trade body of airlines, for remaining non-operational. Amid such setbacks, India’s aviation regulator Directorate General of Civil Aviation (DGCA) had conditionally extended Jet Airways’ AOC until September 9. Now, the re-certification process may take anywhere between four to six months. “Assuming the judicial proceedings and IBC matters are all closed, and the re-certification completed in a manner conducive to the restart of operations, Jet Airways 2.0 then has to cross a number of other hurdles,” says Satyendra Pandey, Managing Partner at aviation advisory firm AT-TV. These range from hiring staff members and entering a market that is witnessing intense competition, to fleet acquisition and slot allocations. “Even in the most optimistic scenarios, the first flight is unlikely to take off before January 2024.”
Legal experts, however, see the potential for a gainful revival due to the goodwill enjoyed by the Jet Airways brand. Other than ironing out the differences with lenders, JKC also needs to address liquidity issues and, most critically, secure the support of the international lessor community. “Jet Airways was a trusted brand with reasonable goodwill, but the new management will need to find ways to tackle the liquidity issues,” says Ajay Kumar, Managing Partner at Gurugram-based law firm KLA Legal. “People in the industry and travellers, in general, would love to see Jet fly again. After Go First filed for voluntary bankruptcy, airfares have seen a steep rise. India has the appetite to absorb another good airline, and Jet just fits the bill.”
Many continue to have fond memories of the service benchmarks that Jet Airways established in the industry and earnestly hope that it makes a comeback. Salil Gupte, President of Boeing India, who started his career as an investment banker in New York, is one of them. “Jet was one of our largest customers prior to its grounding. And it’s an iconic brand. The Jet Privilege [loyalty] programme was one of the most prominent in the region. And there’s clearly a number of assets and a significant amount of goodwill that still exists in the Indian market for it,” he says.
Securing an AOC will be JKC’s next step towards revival. “The silver lining is that they have done this once earlier,” says Reeva Chugh Arora, Founding Partner at New Delhi-based law firm AviLeague Partners. After the re-certification, the airline will have to survive in a hypercompetitive environment. “A lot has changed in the past four-plus years since Jet Airways was grounded. Now, the market has the well-established low-cost carrier IndiGo, full-service carriers Air India and Vistara backed by the Tata group, and Akasa Air as its competitors. Popular routes such as Delhi-Mumbai will be hard to grab.”
The settlement of employee dues in alignment with NCLAT directives and ratified by the SC represents not a mere stride, but a bond towards legitimacy
Narayan Hariharan
Former Senior Vice President-HR
Jet Airways
A view in the aviation industry is that the revival of Jet Airways has faced headwinds due to the lack of pedigree among consortium owners Murari Lal Jalan and Florian Fritsch in the aviation industry. Former Jet Airways staff BT spoke to for this story say that while they have met Jalan on a few occasions, Fritsch, a German national, has always been conspicuous by his absence. The promoter of London-based Kalrock Capital Partners is described by his old associates in Europe as a flamboyant individual with a passion for expensive suits and watches, traits not usually associated with German ethos. “The new owners have no idea of the airline business… The saddest thing about this whole resolution plan is that the CoC didn’t conduct proper due diligence. Like in Air India’s case, so many people were interested in the airline, but the government didn’t just offload it to anyone with money,” says one of the ex-employees. Some in the industry also believe that the consortium owners are fronts for either former Jet Airways Chairman Naresh Goyal, currently in Enforcement Directorate custody for allegedly siphoning off hundreds of crores of rupees that Jet Airways had received as bank loans, or the Indian-origin Gupta brothers—Ajay, Atul and Rajesh—who are currently wanted in South Africa on charges of embezzling state funds. Separately, the day-to-day operations of the consortium is run by Jalan’s nephew Ankit Jalan, who is on the Executive Committee of JKC.
Sources close to JKC vehemently deny these claims. “Jalan and Fritsch have experience in turning around loss-making businesses. Both have always believed in taking challenges head-on. Since aviation is a high-expense business, they have a highly-skilled team of professionals who have worked with them for several years to keep business costs in check,” declares one of the persons. Arora of AviLeague also feels that merely focussing on their lack of prior experience in the aviation industry may not be the best way to assess their intent. “It is said that running an airline is not for the faint-hearted, and the consortium has put all its might behind the airline in the past two years.” Therefore, a lack of pedigree cannot be an excuse to bar them from the process.
In a sharp analysis, Jitender Bhargava, former Executive Director of Air India tells BT that the unfolding situation “paves the way for further questions on the credibility of the revival, the practicality of the business plan, and the suitability of the new promoters to run an aviation business”. A better approach would have been for the promoters to secure finances before commencing the revival operation. Comparing Jet Airways 2.0 with Akasa Air—that had announced its intent to launch operations around the same time—he points out, “Akasa made it be known that they were good to place an order for 70 plus aircraft, had Rs 240 crore in initial financing from [the late] stock market investor Rakesh Jhunjhunwala, and the time period in which they would be commencing operations.” Yet Jet Airways 2.0, despite having a CEO, CFO and director of operations in place, did nothing of that sort. He says the regulator must proactively verify any future business proposals to ensure transparency and strategic soundness of would-be promoters. “DGCA should not allow the initiative to rest with the airline. It is sufficiently empowered to summon airline promoters and ask them to lay down the business plan in front of [it].”
The owner of Dubai-based MJ Developers, Jalan remains an enigma, with many in India Inc. only hearing of him after JKC’s resolution plan for Jet Airways’ revival was approved. He is said to have business interests in sectors such as paper trading, real estate, dairy, consumer durables, and mining, among others. Other than the Middle East, MJ Developers operates in the Commonwealth of Independent States (CIS), Brazil and India. Jalan’s niece is married into the family of South Africa’s Gupta brothers, who are currently on the run. Hailing from Ranchi in Jharkhand, Jalan is said to keep a low profile.
A former senior Jet Airways executive who declined a job offer from the present owners last year, says, “To get an AOC with a four-year validity, the company needs to have five aircraft in operation within one year. However, the consortium does not have even one aircraft presently.” Further, with Jet Airways 2.0’s plans for a take-off getting delayed, and salary cuts being rolled out in the range of 50-100 per cent and subsequent exits, JKC’s staff strength may have depleted from a peak of around 200 last year to less than 100. Sources close to the consortium, however, continue to maintain that they have lined up a storied team for when they get ownership of the airline. “JKC continues to build a solid, powerful and dedicated team as part of its commitment to put the airline back in the air. The consortium owners are very satisfied with the way the airline is being structured… It’s really unfortunate that an airline, which was ready to launch in September 2022 is not airborne yet,” they say, requesting anonymity as the discussions are not public. But they are finally hopeful of taking to the skies again, especially after the renewed support of the CoC.
But given the largely untapped potential of India’s air transport sector, many in the industry continue to see a chance for Jet’s revival. Domestic carriers ferried 100.61 million passengers in the January-August period, against the 77.07 million passengers during the corresponding period of the previous year, a 30.55 per cent year-on-year growth, according to DGCA data. Bhargava cites the example of ModiLuft, which returned as SpiceJet after folding up in 1996. “If the time lag is less, there are better chances of the airline coming and operating,” he says. Boeing’s Gupte has also reiterated the plane maker’s support for Jet Airways’ revival plans. “We always work very closely with our customers through good times and bad. That’s one of the things that really differentiates Boeing from our competitors.” In a nuanced tone, he tells BT, “We don’t fly passengers, nor do we fly cargo ourselves. Our airline partners fly passengers and cargo, which means that we can only be successful when our customers are successful.”
Fritsch’s website describes him as a prominent investor, consultant and business angel who started his first company at the age of 16. As promoter of Kalrock Capital, he is credited with having made successful investments in diverse businesses such as real estate, electric mobility and renewable energy. A November 2022 investigation by the German business daily Handelsblatt insinuated that Fritsch’s fortune may exist only on paper. “I myself have never made the claim that I have a fortune worth billions,” (translated from German) he said in response to a query from the newspaper.
While urging JKC to urgently resolve the long-standing issues in adherence with the Supreme Court’s directives, former Jet Airways employee Hariharan emphasises that the new owners must also address the questions arising from the long delay, redress the uncertainty surrounding the financial trajectory to be taken by the carrier and display concrete evidence of forward movement, as “On the ground, the reality remains relatively unchanged since 2019, when the airline stopped operating.” Former Air India hand Bhargava takes a contrarian view, suggesting that a balance must simultaneously be struck to protect the interests of the airline as well as the employees. “A lot of claims come up because employees and other stakeholders believe that if the airline is going to fly, let me first try to get hold of my share of the money. They must understand that once the airline flies and makes a decent profit, then they will be able to get their money back.” But if such financial burdens are put on the airline even before its re-launch, it will never take off, he says.
A former Jet Airways 2.0 employee agrees, noting that over time, the once highly valued brand recognition of Jet Airways may start fading, particularly among flyers in their 20s and early 30s who may not have heard of, or flown with the airline. “Just after the Covid-19 pandemic, there was a huge opportunity that has been squandered.” Meanwhile, despite all the odds, sources close to JKC are optimistic about Jet Airways 2.0 launching with six aircraft in the first year, with the number progressively increasing to over a hundred in the next five years. “They [JKC] are actually looking at having 120-plus aircraft as that was the number that Jet Airways 1.0 had at the time of folding up in April 2019.”
If the airline orchestrates a comeback under the stewardship of the new owners, it will also need to adapt to India’s ever-evolving aviation landscape. The industry, meanwhile, will be watching with interest for the Flying Sun’s fate as it will be an important lesson for everyone. But this time, the frequent flyer would hope that General MacArthur’s words, “I have returned!” uttered after his arrival in the Philippines two years later to liberate the nation from Japanese occupation, come true for Jet as well.
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