Jet Airways suspending its operations has got rival airlines eyeing to lease some of the grounded planes, as well as vacant slots and augment their capacities.
Jet Airways decided to suspend its operations, temporary for now, earlier this week after it failed to secure the funding necessary for its working capital needs. The airline, until a few months back, had close to 120 air planes, a fleet comprising narrow body Boeing 737s, wide body Boeing 777s and Airbus A330s as well as smaller Bombardier turboprop planes. However, much of the airline’s fleet was grounded as it failed to pay lessors. Jet owned only 16 planes, including the 10 wide-body 777-300 ERs. Left with less than 10 planes and no money to service day to day operations, the full service carrier stopped flying; its last plane landed in Mumbai on Wednesday night.
State-owned Air India’s chairman and managing director Ashwani Lohani is already interested in leasing five of the Boeing 777s, which are used on international long haul routes. Lohani wrote a letter to State Bank of India’s chairman Rajnish Kumar “exploring the possibility” of operating five Boeing 777s on routes such as Mumbai-London, Delhi-London, Mumbai-Dubai and Delhi-Singapore.
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The SBI-led consortium has initiated a process of finding a new investor for the cash strapped Jet Airways.
Air India is also learnt to have hired around 100-150 cabin crew members of Jet Airways.
Elsewhere, low cost carrier SpiceJet, which also has a fleet of Boeing 737s, has announced plans to induct at least six more of the planes on lease, which are in addition to its last week’s announcement to lease 16 Boeing 737s. It had also separately announced plans to lease five 90-seater Bombardier Q400 air craft.
Jet Airways had a higher share at metro airports like Mumbai and Delhi. The airline’s grounding has opened 400 slots at airports, which could be leased out to rivals in the short-term.
Directorate General of Civil Aviation regulations mandate a slot to be vacant if it is not flown for a month, although in special cases like bankruptcies, an airline may be allowed to hold on to the slots. According to an aviation analyst, DGCA has already started reallocating Jet’s slots to other airlines, although the move is temporary for now, and contingent on Jet resuming operations.
Jet Airways accounted for 24 per cent capacity on top-10 domestic air traffic city routes, which has now come down to zero. This has driven up air fares. Some of the airlines like Indigo, SpiceJet as well as others are looking to cash in and add more capacities, as and when slots become available.
Ajay Singh, the chairman and managing director of SpiceJet has said that it was working closely with the government and regulators to help minimise passenger inconvenience and the induction of 27 additional aircraft should be able to ease the pressure situation.
“We are taking all possible proactive measures to deal with the sudden reduction of aviation capacity in the Indian market,” he said.
SpiceJet has already announced flights to several new international destinations like Kathmandu, Hong Kong, Bangkok, Riyadh and Dubai among others.
“Jet accounted for a solid 14 per cent of India’s international airline capacity share before disruption. With India exhausting bilateral flying rights on most short-haul destinations, vacation of slots by Jet is a positive for airlines such as Indigo, SpiceJet and Vistara, who are all aspiring to ramp-up their international operations,” said Garima Mishra, analyst at Kotak Institutional Equities.
With Jet’s grounding, Air India remains the only other Indian carrier to operate wide-body planes on long-haul international destinations. Mishra estimates therefore that India will lose some of this international capacity to foreign airlines.
In the domestic market, meanwhile, with airlines such as SpiceJet, Vistara, Air Asia and GoAir, all looking to add capacity, their market share is expected to go up.
The lenders had initiated a process to bring in a new investor into Jet Airways, before the airline suspended operations. The airline had a debt of around Rs 8,000 crore, plus the money it owes its lessors. On March 25, Jet’s promoter and chairman Naresh Goyal had to step down, paving the way for the banks to gain control of the airline. The bank-led resolution plan envisaged conversion of debt to equity, giving banks a majority stake in the airline. The lenders were to immediately inject Rs 1,500 crore into Jet Airways, which would be used to pay salaries and lease rentals, which would have helped bring some of the grounded planes back into service.
However, much of those emergency funding never came. Earlier this week Jet Airways’ CEO Vinay Dube had sent an SOS to the lenders to provide at least Rs 400 crore, but with that not forthcoming, the airline was left with no choice but to suspend operations temporarily.
Banks instead pressed ahead with the search for a new investor, who could bring in the much needed cash as well as a concrete plan to steer the airline out of turbulence.
"The lenders after due deliberations decided that the best way forward for the survival of Jet Airways is to get the binding bids from potential investors who have expressed EOI (Expression of Interest) and have been issued bid documents on April 16," the banks had said on Thursday, “reasonably hopeful” of the bidding process being successful.
Bid documents to eligible recipients have already been issued and the process will be completed by May 10. The management, employees and even the lenders are now living on hope and prayer that indeed a new investor will bail Jet Airways out soon.