Etihad Airways wants to invest more in Jet Airways

Jet Airways suspended operations on April 17, 2019. Bankers, led by SBI, took on to themselves to restructure and sell Jet Airways, to be able to reclaim their loans to the bank. The start of the process saw several potential investors expressing interests like Etihad Airways, TPG Capital, Indigo Partners and India’s Sovereign Wealth Fund, National Infrastructure Investment Fund.

Even the ex-Chairman of the airline, and part owner, Naresh Goyal formed a consortium with Adi Partners and Future Trends Capital. But their bid was disqualified as other investors protested. May 10, 2019, was the last date to submit binding bids. Everyone, except Etihad Airways, backed out.

Etihad Airways Jet Airways news

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Etihad submitted a conditional offer just before the deadline ended yesterday evening. According to Etihad,

Etihad has confirmed its interest to re-invest in a minority stake in Jet Airways, subject to conditions. Etihad has been working consistently with key stakeholders in India over the past 15 months to help find a solution which would ensure Jet’s return as a viable and competitive Indian airline, and continues to do so.

It is learnt that Etihad wants to be a minority shareholder only. Currently, Etihad owns a 24% stake in Jet Airways and looks like they don’t want to increase it further. India’s FDI norms allow for only 49% stake in an airline to be owned by a foreign investor.

Etihad also said that it would only participate if the lenders find someone who is willing to take up a majority of the new investment and stake in Jet Airways.

While the bid is not opened yet, Etihad also wanted the lenders to take a haircut on the recovery of loans provided to Jet Airways. During the bidding talks in April 2019, it was reported that Etihad wanted the lenders to take an 80% haircut on the INR 8,500 crore (USD 1.2 billion) worth of loans.

SBI also clarified that it had received some unsolicited bids for Jet Airways which would be looked at a later stage. One of the bids was from Adi Partners, who had submitted a bid with Naresh Goyal earlier. The other proposal was from Jason Unsworth who reminds me of a fictional character, Sheikh Chilli.

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VT-JWV, Jet Airways A330 at Mumbai airport

Surprisingly there was a buzz earlier that Jet Airways employees would also form a consortium and rope in a partner to put forward a bid to revive Jet Airways. But the same wasn’t mentioned by SBI Caps which is handling the bidding process.

Anyways, Etihad submitting a conditional bid is no guarantee that it will invest. There may be a lot of conditions, and it most likely will just stretching the process further.

As it is there isn’t much of Jet Airways left except the dues. 72 Jet Airways aircraft are deregistered. The list includes 1 777-300ER, 4 A330-300, 2 A330-200, 1 ATR 72-600 and the rest 737s (-700, -800, -900, -900ER and MAX).

Besides, lessors have also applied to deregister 17 more Jet Airways aircraft, one 777-300ER, five 737s and 11 ATR 72. That makes it 89 jets. Jet Airways had a fleet of around 116 aircraft, out of which not many are left now. Even Boeing reclassified Jet Airways order for 737 MAX and ten 787-9.

SpiceJet has started inducting 22 ex Jet Airways 737s of which 13 have already started flying. They are looking to lease up to 40 Jet Airways aircraft. They even changed their business model from a no-frills carrier to a hybrid carrier and launched SpiceBiz, their business class offering on select flights operated by ex-Jet Airways 737s.

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SpiceBiz, SpiceJet’s business class seat

Air India had expressed interest in taking over 5 Jet Airways 777s but later backed out as the 777s required a lot of maintenance to make them air-worthy.

Now Vistara is looking to take around ten 777s and also a couple of A330s to add flights to Europe. Also, Vistara is looking to add a sub-fleet of a couple of 737s which flew for Jet Airways.

Slots have been distributed temporarily to other airlines, and the Ministry of Civil Aviation is also looking at allocating Jet Airways international flying rights to other airlines temporarily.

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ex-Jet Airways 737 with a SpiceJet logo

Airlines and other companies have started recruiting Jet Airways crew and employees. Several executives have also quit Jet Airways. It would be a mammoth task for any investor/consortium who wishes to revive Jet Airways even if they have the financial power to clear dues to the tune of thousands of crores.

The last option for the lenders if Etihad backs out is to take Jet Airways through bankruptcy proceedings.

What are your thoughts on Etihad submitting a conditional bid? Will they go ahead with their proposal?

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