24 March 2019: Lenders to cash-strapped Jet Airways plan to sell their stake in the airline through an open auction process over the next two months, seeking maximum value for the asset.
In the meantime, the consortium led by State Bank of India will provide emergency funding of around Rs 1,500 crore to bring operations back to normal, in phases. A senior executive of a large public sector bank said this is a transitory arrangement in which the lenders will acquire control, run the process of transparent bidding, and receive final bids by the end of April.
The bids will then be evaluated according to guidelines by the civil aviation ministry, following which a buyer will be selected. The outer limit for the process is May-end. Transfer of control to the buyer will be effected by June-end.
Asked about the hit banks will have to take on exposure, a senior banker said: “The extent of write-downs we may have to take will become clear from the bids (price indicating expected haircuts) during the auction.”
Lenders said they would prefer to have an experienced banker as chairman of the board.
Banks will provide emergency funding of about Rs 1,500 crore to the airline and want it to return to 100 per cent operating capacity.
A large number of planes in Jet’s fleet have been grounded due to non-payment of lease rentals. Lenders (consortium members) are approaching the Union civil aviation ministry with a plea not to take away the airline’s landing rights, slots and traffic rights, as it is necessary for protecting the economic value of the enterprise and attracting bidders, the bankers added.
The carrier’s international network and slots at key airports, too, are an attraction and lenders will be able to draw interest if they are successful in restoring the airline to its earlier strength.
“The airline has a well-balanced international network and serves all main markets from India, Hong Kong and Singapore in the east, several cities in West Asia, and London. Its partnership with Air France-KLM and Delta has enabled it to tap into Europe and North America and garner corporate traffic from those countries. The other key attraction is slots, especially at Mumbai airport, where it continues to be the dominant carrier,” said an aviation expert.
With the fund infusion, the airline will be able to partially clear dues on lease payments and then negotiate a fresh payment plan to get the fleet operational, said people in the know.