It is judgement day for
Jet Airways on Friday as lenders to India’s oldest privately-held airline will meet later in the day and are expected to announce a winning bid for the airline. Jet Airways’ hope to regain its wings hinges on the offers that it receives on May 10, which is the last day to submit binding bids for a potential takeover of the airline.
SBI Capital Securities, which is conducting the bidding process, has shortlisted four suitors that are eligible to submit binding bids. These include Etihad Airways, National Investment and Infrastructure Fund (NIIF), and private equity players TPG Capital and Indigo Partners, sources told
With each passing day, stakeholders are losing hope. Competitors are swooping in to take advantage of Jet’s precarious position—
taking over its employees, aircraft, slots—to fill the large gap Jet Airways left in the aviation market.
The airline temporarily suspended all operations on April 17 due to a lack of funds to keep the airline afloat after lenders led by State Bank of India declined the management’s request to infuse emergency capital into the airline, which is saddled with over Rs 8,500 crore of debt.
Many of its 119 grounded aircraft have now been taken over by rivals SpiceJet and Air India. The airport authorities are also in the process of allocating many of Jet Airways’ slots to other airlines on an interim basis. About 120 slots vacated by Jet have already been handed over to its rivals across several airports in the country.
While the government says the move is aimed at increasing capacity to meet peak season traffic and rationalise spiralling airfares for the convenience of the customers, the potential suitors of the airline are increasingly getting nervous about the viability of investing in an airline that is grounded, and fast losing its remaining assets.
CNBC-TV18 had earlier reported that soon after the government began allocating the airlines’ slots and planes to its rivals, potential bidders began to question any investment into Jet Airways. Bankers to the airline, sensing this reluctance, had even approached the government to ensure Jet’s assets are protected in order to keep the bidders interested. The Ministry of Civil Aviation announced on April 23 that it would allocate some of the slots at Indian airports vacated by Jet Airways to other domestic airlines on "a purely temporary basis, for a period of three months."
Is this going to be enough to attract bids for a grounded airline? Many banking executives
CNBC-TV18 spoke to did not sound too confident. While the banking executives insisted it would be premature to conclude that no bids would be received, they also admitted that they were prepared for a large haircut.
With the operations grounded, banking executives in the consortium told
CNBC-TV18 on the condition of anonymity that haircuts will be inevitable. Aside from Rs 8,500 crores of debt to banks, Jet Airways has other liabilities of Rs 5,000 crores, taking the airline’s total liabilities to about Rs 13,500 crores, banking sources told CNBC-TV18.
A senior executive of a large bank in the consortium said it is unlikely that the second round of bidding would be conducted, adding that if no suitors come forward with binding bids, banks will consider directly negotiating with other players that come forward.
While bank officials
CNBC-TV18 spoke to did not offer names of other interested suitors, speculation has been rife about players like Tata Group and Qatar Airways potentially coming forward later. CNBC-TV18 could not independently verify if Qatar Airways or Tata Group have initiated discussions on this front yet.
Even as worries mount about the lack of interest in the airline, unsolicited bidders have lined up, showing interest in taking over the airline. For instance, Jet Airways' Employee Consortium has offered to raise Rs 7,000 crore to invest in the airline.
Jason Unsworth, a British entrepreneur, has made claims on his Twitter handle that he has formed a consortium and submitted an Expression of Interest to acquire Jet Airways.
The latest one is London-based AdiGroup's
AdiGro Aviation, which had previously partnered with Naresh Goyal and was subsequently not shortlisted in the EOI round, has on Thursday submitted a binding bid to acquire Jet Airways. AdiPartners chairman Sanjay Vishwanathan told CNBC-TV18 that although his bid will not be considered in this round, he is willing to partner with Etihad Airways if talks materialise.
The clock is now ticking, and if there are no bids received by the end of May 10 and no new serious suitors come forward, banks will be left with little choice.Taking the airline to the bankruptcy court, however, will be the last step the bankers would take, and remains the least preferred route for resolution, said the head of a large bank in the consortium of lenders to Jet Airways.