State Bank of India, the country’s largest lender, says two unsolicited bids have been received for the grounded full service carrier Jet Airways. The development comes almost a month after the Mumbai-based airline had to suspend operations temporarily as its fleet dwindled and it failed to get the much needed funds to run day to day operations.
Jet Airways, was until a few months ago, the country’s second largest carrier in terms of market share. However, as losses mounted, salaries to employees got delayed and it also couldn’t pay back its lessors, forcing it to ground much of its fleet. It has a debt of close to Rs 8,000 crore. In March, a consortium of lenders nudged promoter Naresh Goyal to step down as the chairman of the board and initiated a process to find a new investor.
Expression of interest (EOI) in Jet Airways was invited on April 9, with the lenders offering as much as 75 per cent stake in the carrier to potential investors.
Four entities—Etihad Airways, which held 24 per cent stake in the carrier, private equity firms TPG Capital and Indigo Partners and the National Investment and Infrastructure Fund—had submitted their interest in Jet Airways.
Two unsolicited bids had come in for Jet Airways and a binding bid is expected by the end of the day from one of the four parties, who had earlier filed the EOI, said SBI officials without disclosing details. Abu Dhabi-based Etihad may be interested in making additional investments in the airline.
Earlier this week, a little known British entrepreneur Jason Unsworth had shown interest in investing in the airline. He is the founder of the startup Atmosphere Intercontinental Airlines, which aims to start long haul flights between London Stansted and Southeast Asia. US-based Future Trend Capital and My World Venture among others are likely to be the consortium partners.
“We received a positive response from SBI chairman Rajnish Kumar...and have been requested to submit the remaining information and documents, which I am in the process of preparing now,” he tweeted earlier on Friday.
AdiGro Aviation, part of the UK-based Adi Group is also reportedly bidding for Jet Airways.
Jet Airways till last year had a fleet of close to 120 planes, much of them leased. Apart from the planes, its slots at major airports and international flying rights would be of interest to potential investors. However, some of these have since been deregistered on the request of the lessors and leased out to other airlines. Some of the slots too have been given to other airlines, albeit temporarily.
The lenders have come in for a lot of criticism for failing to infuse emergency funds in the airline, which would have allowed it to continue to operate, while a search for an investor was on. Earlier this week, the pilots of the grounded had filed a petition in the Supreme Court. They had sought a direction to SBI to provide interim finance so that operations could be restarted.
SBI chairman Rajnish Kumar told reporters on Friday that the bank had made “disproportionate effort to keep it flying.”
“Jet Airways is such an important airline for India’s aviation sector and in the larger interest of the aviation sector and the Indian economy, you can say the effort has been disproportionate,” he said.
Earlier this week, Unsworth said the idea was to save what was left of the airline, such as the AOCs (air operator's certificate), traffic rights, slots, especially the long haul traffic rights, and that would make Jet Airways successful again.
However, sources indicate that since the two bids were unsolicited, they would only be considered at a later stage if Jet Airways failed to get any solicited bids.
Kumar is hopeful that an investor will be found for Jet Airways. However, if a buyer does not emerge, the only option that will then be left is to approach the bankruptcy courts. However, lenders may not have the intention to do that just yet.
“In service industry, what has to be realised, unlike manufacturing, the chances of recovery in the service industry are virtually nil because there are no hard assets. So, even if you go to NCLT, if there are no hard assets, no plants, no machinery, no fixed assets, so what will you get and what will you sell,” said Kumar.
There is a possibility that the lenders may call for fresh round of bids or extend the timeline for accepting bids, according to banking sources. However, all will depend on what is the response in the initial round of bids, the deadline for which ends on Friday.
