Jet Airways could find a savior in external funds

“It is very surprising to see the shares of a former airline hovering around the 100 rupee mark. It’s actually weird.

The previous management failed Jet Airways, much to the dismay of air travelers. After years of unsuccessful search for a well-heeled savior who could bring the airline back to the ground in the air, help could be on the way, according to industry sources. Jet Airways, they say, could secure investment from Moscow-centric investors to revive the beleaguered airline by the end of 2022. It is well known that several billionaires in Russia are considering leaving Western countries and investing in it. more welcoming shores. India qualifies, especially because of the close relationship forged between Prime Minister Narendra Modi and President Vladimir Putin, a masterstroke for the two leaders.
An industry source in the aftermath of the defunct airline’s developments told this reporter that the new owner of Jet Airways, the Jalan Kalrock consortium, could enlist the help of Russian-centric hedge funds which the company said. ‘insider, have been negotiating a long-term deal for almost a year and a half. “If this pays off, the airline will get the money it badly needs to revive itself, although so far the big investment has not happened. It could happen this year, ”the source added. It is known that some competitors may work hard to defeat the deal, fearing that Jet Airways could regain the glamor it had before it was stranded by the previous management, despite ties to a prominent politician (in what concerns the portfolio of airlines) in the previous government.
Cash is vital for Jet Airways and without a substantial infusion it will be a long time before the company regains its operational status. Hanging at the head of the company like the proverbial sword of Damocles, it is a huge Rs 8,000 crore more of the money that the former promoter of Jet Airways, Naresh Goyal, owes to Indian banks. And Goyal has to pay the money, which is late. The banks are however optimistic that the contributions will be paid by the new consortium and of course by the promoter of Jet Goyal, and have maintained their loans by financing the airline to the tune of Rs 10 crore per month.
Interestingly, Jet Airways stock still hovers around Rs 89.65 on the stock market. “It is very surprising to see the shares of a missing airline hovering around the 100 rupee mark. It’s actually weird, there is probably optimism about the arrival of the money. The deals with Russian fund managers must therefore take place and not end up in smoke like other efforts have done, ”the source added. There are discussions in the halls of the Ministry of Civil Aviation that the Indian government may not allow Jet to sink. After the Kingfisher fiasco, this could send a very bad signal to domestic and international markets. In 2012, Kingfisher Airlines, founded by spirits baron Vijay Mallya, went bankrupt for lack of liquidity, leaving its lessors and creditors with pending dues.
After the Kingfisher sinking, India ratified the Cape Town Convention, an international treaty making it easier for foreign owners to repossess planes in the event of airline defaults. This means that Jet rental companies could choose to recover planes in the event of a fault.
Jet Airways has in all likelihood been taken to court by its creditors under India’s new insolvency laws. But there is hope among those keen to revive the airline. The consortium recently said it plans to invest more funds in the airline. An initial investment of Rs 350 crore has not yet materialized, but has reportedly been put on the fast track. The money is yet to come. What is important is that Jet Airways has not yet obtained the Air Operator Certificate (AOC). More importantly, it has yet to formalize leases for 20 planes. The consortium plans to induct 20 planes and is in discussions with Boeing and Airbus for orders. But much of it remains on paper right now, according to industry sources.
The National Company Law Tribunal (NCLT) in June 2021 gave the green light to Kalrock Capital and Murari Lal Jalan to relaunch the heavily indebted Jet Airways. Now the consortium has decided to pay the staff of the old airline a sum of Rs 100 crore, which is about 8% of the total of Rs 1,254 crore owed to them in provident fund installments, d Cashing of leave, tips and six months. salary.
This effectively means that if a former Jet Airways employee had unpaid dues of Rs 5 lakh, the employee would only receive Rs 40,000. The consortium also said that of the 4,000 employees, only 50 will be retained in Jet 2.0. . The Times of India said about 3,796 employees have not resigned in hopes of being retained whenever Jet resumes operations.
According to the overhaul, the rest of the employees will be demerged into a groundhandling subsidiary called “Airjet Ground Services Limited (AGSL)”, which has not yet been created. It is proposed that 24% of the shareholding will be owned by Jet 2.0, and the remaining 76% will be donated to the employee trust yet to be formed. However, if the trust cancels the offer, Jet will retain 100% ownership and deal with the issue as it sees fit, the conglomerate said.
Jet Airways, launched by Naresh Goyal in 1992, was grounded in 2019 due to a severe cash shortage. All the employees, including those who had worked for the airline for more than 25 years, suddenly found themselves without a job. Jet admitted claims of Rs 7,460 crore from financial creditors including State Bank of India (Rs 1,636 crore), Yes Bank (Rs 1,084 crore), Punjab National Bank (Rs 754 crore) and IDBI Bank (Rs 594 crore), among others.
But the consortium has offered to pay back only Rs.1183 crore to financial creditors and employees over five years. The consortium had to infuse over Rs 600 crore in one year with the first installment of Rs 350 crore in the first six months. Now he plans to invest Rs 600 crore in six months. “We can inject $ 100 million to $ 200 million. Although this is only an estimate, it depends on the evolution of market dynamics due to the Covid-19 pandemic, ”said Ankit Jalan, nephew of Murari Lal Jalan, the head of the consortium, cited by Hindu Businessline.
Seventy-year-old Goyal, who started out as an assistant at a travel agency, must use his negotiating skills to put Jet Airways back in the sky. Jet Airways, still on the ground, has delayed pre-delivery payments to Airbus SE and Boeing Co and is behind on its repair and maintenance contracts.
“We expect there will be a rescue, but we don’t know when. It has to happen quickly, ”the source said. Money from Moscow-centric hedge funds could be the answer in 2022 for the consortium. The real story should emerge within the year.

Shirlene J. Manley