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Jet Airways crisis deepens as US EXIM Bank to start repossessing 10 Boeing 777

NEW DELHI: The US Exim Bank has recalled all loans extended to Jet AirwaysNSE -8.10 % for buying Boeing aircraft and is likely to take the possession of these aircraft, thus, taking away all the long-haul Boeing 777 aircraft that the airline owns. 

Sources said that the amount of loan is about Rs 2,000 crore and the Bank is soon going to initiate the process of possessing the aircraft. 

“The bank can take all 10 Boeing 777 aircraft that the airline owns and that would mean that the airline would not have aircraft left to operate,” said an airline executive, who did not want to be identified. 

While the past few months have been turbulent for Jet Airways employees and customers, the cash-strapped airline progressively cut down all sorts of flights with the grounding of their aircraft by the lessors. Their international route network to Europe, which was believed to be operating normally, at least with the aircraft they own (Boeing 777s and some A330s), was also brought to a complete halt with all the aircraft brought back to India.

The airline states this was due to the paucity of funds, but the airline also has one of their Boeing 777 aircraft impounded and parked at Amsterdam airport at the moment, due to a case pursued by one of their vendors based in the Netherlands, basis which an order was issued by a Dutch court to seize the plane.

The airline is currently operating a single digit fleet of aircraft, which is down to one 737 aircraft and 6 ATR turboprop aircraft. Given that the Reserve Bank of India’s (RBI) February 2018 circular giving banks six months to resolve stressed assets was declared ultra vires by the Supreme Court, this put to rest the earlier plan of the banks to take over Jet Airways' majority shareholding and have a management team report to the board of the company while the banks looked for a buyer.

 Jet Airways crisis: Debt-laden airline needs bigger cheque, experienced turnaround team to avert shutdownRepresentational image. Reuters.
The airline did receive, I would say, fairly decent interest from some marquee companies in the search for a new bidder. Private equity firms TPG Capital and Indigo Partners were part of this expression of interest (EoI), but other rumored names, which belong to the airline industry such as Delta and Tata, were missing.

TPG Capital is no stranger to aviation, having resurrected Continental Airlines in the early ‘90s. Indigo Partners, co-founded by Bill Franke, owns stakes in many no-frill carriers around the world. Bill Franke was the chairman of America West Airlines, Tiger Airways and then Spirit Airlines at various points in time.

While Etihad is a serious bidder, I am not sure of how things work with them, given they have failed in the past to resurrect other airlines they’ve invested in, including Air Berlin and Air Seychelles. Even Naresh Goyal put in an EoI, but as per media reports, he has withdrawn his interest.

At the place it stands right now, Jet Airways lenders have refused to infuse any cash into the company, and the airline is running on fumes. The crisis-hit Jet Airways needs to operate 6 flights a day to retain its scheduled operator permit, and I would presume they are trying to do just that. But the airline has run out of options, and as per the news coming out of their board meeting on Tuesday, they have given the authorization for one final negotiation with the banks for infusion of funds on Tuesday with CEO Vinay Dube.

Unfortunately, if this does not go well and banks don’t infuse any money into Jet Airways, then the airline is staring at grounding because there is only fuel to last till Tuesday for the airline. This would be the first time in 25 years that the airline will face a complete shutdown.

The consequences of this grounding could very well be the last nail in the coffin of the ailing airline. Jet Airways' partners are already putting their contingency plans in place. Delta/KLM/Air France, the troika that is one of Jet Airways biggest partner for international travel, has already stopped accepting bookings for transporting Jet Airways customers on their planes under the code share pact.

Their competitors are moving in fast to take slots left behind by Jet Airways to launch temporary flights from Mumbai, hoping they would get to keep the slots in the months ahead. Jet Airways has already had to turn in 24 aircraft, 14 of which are going to SpiceJet presumably. Another 12 are waiting to be deregistered, which will be a big cut down in their fleet if the airline hopes to come back at any point of time.

Clearly, the formula of the airline being saved due to it being the election season and reflecting badly on the government of the day is not playing out at the moment. The airline, its customers who have travel plans, and its staff are all looking into an abyss at the moment, and the airline seems to have run out of options, and India, of a very fine airline.

If Jet Airways would need to come back from this crisis, it would need an even bigger cheque and an experienced turnaround team willing to make the hard calls to have the airline fight back.

access_time16 Apr 2019 01:04 PM