Jet creditors to be paid ₹600 cr over two years

This would include raising ₹125 crore from selling non-core assets of Jet, lawyers representing lenders and their chosen resolution professional told the Mumbai bench of the National Company Law Tribunal (NCLT) on Tuesday.

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The consortium comprising London-based asset management firm Kalrock Capital and entrepreneur Murari Lal Jalan is currently awaiting the bankruptcy court’s approval to restart Jet that stopped flying in April 2019 amid an acute cash crunch and large debt.

The group has proposed to invest ₹475 crore in the first two years and ₹125 crore from the sale of existing non-core assets like realty and luxury cars of the airline by the end of the first year. It has also proposed to pay ₹131 crore, ₹193 crore, and ₹259 crore at the end of the third, fourth and fifth year, respectively, to financial creditors from the airline’s cash flows.

Overall, the consortium hopes to repay ₹1,183 crore to creditors over five years, which would include collections from asset sale proceeds and cash flows.

A committee of creditors (CoC) of Jet Airways had in October 2020 approved the revival plan submitted by the Kalrock-Jalan group.

The consortium plans to make an initial investment of ₹280 crore within 180 days of the court approving the resolution plan, a lawyer representing the resolution professional for Jet told NCLT. This will be used to pay off financial creditors ( ₹107 crore), corporate insolvency resolution process or CIRP ( ₹43 crore), workmen and employees ( ₹113 crore), other creditors ( ₹9 crore), and contingency fund ( ₹8 crore). The group has also proposed to pay ₹195 crore to financial creditors by the end of 730 days or the second year from the completion of the process.

The successful completion of the investment plan would result in the consortium taking an 89.79% stake in Jet Airways. The other shareholders would be assenting financial creditors (9.5%), workmen and employees (0.5%) and public shareholders (0.21%). Stakes held by former promoter Naresh Goyal and family, Etihad Airways, and financial institutions will be extinguished, the resolution professional’s lawyer informed the NCLT.

According to the proposal, which was shared with NCLT on Tuesday, the consortium plans to replace 11 existing older planes owned by Jet with six narrow-body Boeing 737 planes, which will be used to initially operate on domestic routes and further extended to short-haul international destinations. The consortium plans to induct one plane every month, with the aim of having 120 aircraft in six years. The consortium proposes to initially begin operations with 50 staff, mostly hired from the airline’s existing employee pool, and estimates that it will require about 114 employees per aircraft.

Jet currently has 3,681 staff and workmen on its payroll, who would be demerged from the parent airline into subsidiary Aircraft Ground Services Ltd that would be owned by a trust formed by workmen and employees. The consortium will transfer 0.5% equity of Jet to the trust that will provide services to the airline for a fee.

Experts caution that a successful return of Jet Airways would hinge on the product offered by the new owners.

“Jet will probably return to the sky towards the end of the pandemic...but the success of the airline will depend on its product offering, ," said Mark Martin, chief executive of aviation consulting firm Martin LLC.