It's a plane deal: What does Jet offer in terms of saleable assets?

Jet acquired 10 Boeing 777s in 2006-07 with loans from domestic and foreign banks. The US Exim Bank guaranteed the loans
With the lenders deciding to refer Jet Airways to the National Company Law Tribunal (NCLT) after the airline failed to find any buyer, what does it offer in terms of saleable assets in the case of liquidation?

 

Banks have lent Jet around Rs 8,500 crore and the liabilities, including payments to vendors, are more than Rs 25,000 crore. 

 

Based on an assessment, its most valuable assets are its planes. According to sources, it has 16 Boeings, which include 10 Boeing 777, and a previous valuation by banks says they are worth more than Rs 5,000 crore. Jet had acquired the 10 Boeing 777s in 2006-07 with loans from domestic and foreign banks. The US Exim Bank guaranteed the loans.

 

However, the airline defaulted on payments of around $35 million and the lenders earlier were in talks to take possession of the planes.

 

However, firms like cargo handler World Wide Flight Services have moved court in the Netherlands for seizing the 777 aircraft in Amsterdam. And some of the lenders like ING Singapore have approached the Directorate General of Civil Aviation and filed for de-registering these aircraft. It would be a challenge for the resolution professional to untangle this mess.

 

Secondly, Jet Airways has a 49.9 per cent stake in royalty programme company Jet Privilege Pvt Ltd (Etihad owns the rest), which has more than 9 million members. At its peak when it was negotiating with Blackstone, the valuation of the company was at $900 million. But its value has eroded substantially after Jet closed operations because the flying points were linked closely with members flying Jet.

 

Third is its brand value, even though it has never been assessed publicly. But that will be relevant only if Jet gets an offer from an investor which would like to buy and run the airline once again. At that looks highly unlikely.

 

Fourthly, while the details are not available, Jet does have real estate assets, which include the swanky training centre in Mumbai with state-of-the-art simulators and modern instrumentation.

 

The problem is that like other carriers, it does not own slots, which could have been sold, in airports either in India or abroad. That is because in India airports own the slots.

 

In the international skies, it had valuable slots in Heathrow but Etihad has bought them.

 

The NCLT will have to grapple with the sensitive issue of paying the employees a sum that was around Rs 1,000 crore in March this year.

 

The senior executives have not been paid since December last year. The company, according to insiders, still has more than 9,000 permanent employees, including over 700 pilots and a cabin crew of more than 2,000.

 

About 5,000-odd employees have got jobs in other carriers and companies.

 

The question is whether it will find a buyer even if the lenders are ready to take a huge write-off?

 

“We have enough employees and pilots to run 20 aircraft if the vendors and lessors take large cuts. But for a new player it will take three to five years and a lot of investment for Jet to get back to its former glory,” says a senior executive of the airline. But it might look like an attractive preposition for carriers like Etihad.

 

After all, the NCLT will write off substantial debts not only of banks but of vendors and lessors too. It can ask for an exemption from the open offer guidelines of the Securities and Exchange Board of India, and in three months the new owner will get back all the slots.