The Indian carrier, Jet Airways, caused quite some stir in 2019. The Airline which commenced its operations on May 5, 1993, decided to cease all activities after the company was unable to service its scheduled debt obligations due to financial distress on April 17, 2019. Back in ’93, the airline leased four Boeing 737-300 aircraft to begin their operations, while in April 2019, when it all crumbled down, Jet had a colossal fleet of 115 aircraft serving over 57 destinations world-wide, including 37 destinations domestically. Indeed, Jet had a tenacious presence in Indian aviation market, and the suspension of its operations came as quite a surprise, given the fact that it was one of oldest and biggest (by fleet size, routes and market valuation) brands in India.
Jet’s grounded fleet at New Delhi International Airport. Image Credits: businessworld
The aviation business industry is quite a cruel one, and talking about Jet in 2020 feels much like milking a dead cow! It’s not even an year since Jet folded, and already, it’s ancient history. However, the ‘Insolvency and Bankruptcy Board of India’ allows Jet to ask for ‘Expression of interest (EoI)’ from possible entities to acquire the Jet’s assets, which include the grounded aircraft, the employee base, the valued brand name, a strong frequent flyer programme, among others (quite a magnanimous value for an out-of-business airline!). Any potential bid is essentially built towards acquiring the enviable pool of landing and parking slots, and bilateral flying rights which Jet had built over the years. These were Jet’s most revered assets and include various prime slots at domestic as well as international airports.
The Jet Airways Boeing 737 MAX. Image Credits: TheBoardingArea
The South American conglomerate Synergy Group, Hinduja Group, Turbo Aviation and a Dubai-based fund have already shown an interest in bidding for the debt-strapped airline, while more EoIs are expected ahead of the January 15, 2020 deadline. The challenge for any buyer taking over Jet includes the contingent liabilities – Jet has dues of more than Rs 8,500 crore ($1.2b) to multiple banks, not to mention the contingent claims of Rs 26,000 crore ($3b) of which only a third have been admitted. However, even if these impediments are taken care of, any new buyer will also require clarity on the issue of control. Etihad retains a 25% stake in Jet, while State Bank of India led consortium owns 51% stake. Any new buyer is likely to want control over the strategic direction of the airline and hence, the control of board seats and strategy must be unambiguous.
Stakeholders continue to hope that a bidder emerges and Jet Airways once again takes to the skies. After all, Jet, in its heyday, was the first choice for the ‘high yield’ business passenger. It perhaps has the capability of being one of the few airlines where talent would leave and then return only to be welcomed back.
Premium travelers, who were Jet’s primary customers back in the day, demand frequency, schedules and product. Jet delivered on the first two but faltered on the third. In re-starting the airline, investment in product and differentiation of product will be essential. Under new leadership, Jet will have to re-build passengers’ confidence across product, network and service. Well, the saga has not yet completely ended for Jet, has it? Will Jet fly again? And if it does, will it be the same ‘Jet’ that was loved by its employees, customers and stakeholders alike? What do you all think?