Jet needs more wind beneath its wings

Given the state of the economy and the aviation sector in particular, Jet Airways needed a strong promoter with deep pockets to be able to strengthen the balance sheet and sustain the operations until the carrier becomes profitable.

The National Company Law Tribunal (NCLT) may have cleared the resolution plan for the bankrupt Jet Airways but it is far from certain the airline will take off soon. For one, the NCLT’s nod is accompanied by a caveat that the airline must win the landing slots within 90 days. It won’t be fair to re-allot the carrier all the erstwhile slots, but a more sensible way to have attempted closure would have been to rope in the government authorities and ensure it would get at least some of those quickly. Also, it is not enough to just take off, the operations need to become profitable soon enough. It is not quite certain that the new promoters—ML Jalan, a Dubai-based businessman who dabbles in real estate and his foreign partner, the London-based financial advisory firm, Kalrock Capital—have it in them to revive the business. Given the state of the economy and the aviation sector in particular, Jet Airways needed a strong promoter with deep pockets to be able to strengthen the balance sheet and sustain the operations until the carrier becomes profitable. A businessman who knows his way around the corridors of power and can convince the government to give the airline the necessary clearances quickly would probably have been more suited to the task.

But, it is not surprising there were no contenders to buy what was once a flourishing enterprise with a strong, loyal clientele. It is true not too many business groups have cash lying around, and the airline business can be tricky in the best of times. But, more than that, businessmen are weary of the government’s constant policy flip-flops and micro-management on everything, from travel routes to pricing tickets. Indeed, had the rules and regulations for foreign carriers been more friendly, a couple of them might have thrown their hat in the ring. An Arcelor Mittal kind of promoter is what Jet needed, and given the strong brand franchise that the airline enjoyed, it would not have been too difficult to get one had the various stakeholders worked harder.

While the corporate insolvency resolution process is no doubt coming along nicely, simply calling for bids and assessing them is probably not always enough. In this instance, the leader of the consortium of lenders, State Bank of India, needed to have worked more closely with the government to make the deal more attractive in terms of assurances on the landing slots. Indeed, the lender came across as over-confident in the early days of the process only to discover there were hardly any good suitors.

The new promoters, who own close to 90% of the airline’s equity capital, are now at the mercy of the establishment’s munificence. They will need to get the regulators to restore the bilateral rights, the airport authorities to give them landing slots, and codeshare agreements with other airlines to come up with a viable flight plan. It is almost like starting from scratch, except that the brand recall would be high. Even if the broader strategy is to cater more for travellers from the smaller cities and towns, and not focus on the lucrative Delhi-Mumbai route alone, some metro routes will be needed to bring in the bread and butter. It was, after all, the heavy-traffic routes that helped Jet corner market-share before it was toppled by Indigo. The government must help the new promoters restart operations quickly. Even if it is a grim reminder of how the country’s banks have allowed good businesses to go belly up by not being vigilant enough, Jet Airways deserves a second chance.