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Taking flight

With a new plan and a new owner, Jet Airways is ready to take to the skies again

Taking flight
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Murari Lal, the new owner of the private airline Jet Airways, which has been closed for more than one and a half years ago, is preparing to bring this again from the ground to the sky. The last flight flown by Jet Airways on April 17, 2019. If everything goes according to Jalan's plan, in 2021, Jet Airways will start flying domestic flights as well as major cities of Europe and West Asian countries. In domestic flights, Jet will focus on expanding its business through the Delhi-Mumbai and Bengaluru routes as before. With this, it will also connect tier-2 and tier-3 cities with Jet services. In order to materialise its plan, new investors of Jet have started searching for trained and experienced employees. Since the negative impact of Covid pandemic and financial crisis are persisting in the aviation sector continuously, many airlines have retrenched many employees in the past months, it is therefore believed that soon experienced human resources will be available to Jet Airways.

Jet Airways will continue to be a listed company as per the plan. Its new owner Murari Lal Jalan is a real estate businessman in Uzbekistan. He has investments in India, Russia and Uzbekistan. Under the new arrangements; Jalan will hold 51 per cent stake in Jet, while 14 per cent will be held by Kalrock Capital and 10 per cent will be held by lenders. Kalrock Capital is London's financial advisory and alternative asset management unit.

It is noteworthy that Jet Airways lenders approved the proposed resolution plan of Kalrock Capital, and Murari Lal Jalan in October and now new investors of Jet are waiting for approval from National Company Law Tribunal (NCLT). The new consortium has proposed to invest around Rs 1,000 crore in Jet Airways and the new owners of the company are ready to invest more in Jet after getting regulatory approvals.

Success planning of new investors will also depend on the early return of slots to Jet Airways. At the time of the jet's closure, it had around 700 slots, of which 116 were allocated at Delhi and 214 at Mumbai Airport. Since the allotment of these slots to other airlines was made temporarily after the closure of the jet, it is believed that the allotted slots of the jet will be returned to it after the approval of the scheme from NCLT.

Jet Airways' loss was Rs 5,535.75 crore in the financial year ended March 2019, out of which loss of company alone was Rs 766.13 crore. In the year 2018-19, the total income of the airline was reduced to Rs 23,314.11 crore as compared to a year ago. Last year, the company had a turnover of Rs 23,958.37 crore. During this period, the total expenditure of the company increased to Rs 28,141.61 crore due to the increase in fuel prices. Jet had to become part of the corporate insolvency resolution process in June 2019, after ceasing operations in April last year.

Jet was unable to pay its employees' salaries due to the mounting losses before the closure. Jet's not merging with JetLite had also adversely affected its financial position. Its reputation was also hit by the Income Tax Department raiding the company's Mumbai and Delhi offices due to allegations of financial irregularities. In addition, Jet Airways was spending Rs 1 more on expenses other than fuel costs than IndiGo. Due to this, at the end of the year 2015, Jet was earning 50 paise per km more on every seat than IndiGo. Indigo cheapened the tickets to leave Jet behind, but Jet did not do so, causing it a loss, which it could not compensate later. Jet suffered the most in 2017 when fuel prices started rising. Its condition worsened further due to its increasing debt.

New investors will need to make Jet Airways more efficient by imparting training to their employees such as pilots, cabin crew, engineers, ground handling staff from time to time to improve the performance of the airline. There is also a need for judicious use of aircrafts on busy routes. If Jet uses more aircrafts on such routes, it will get more earnings. Advertising can be used for enticing passengers. Reducing passenger fares can also be a good option to increase earnings. Passengers can be wooed during festivals with reduction of fares. Lower fares can be offset by making more trips. This goal can also be achieved by committed and quality service. If the new investors of Jet adopt these measures, then they will be able to give a tough challenge to other airlines.

The proposed revival plan of Jet Airways is good news for the problematic aviation industry. Currently, the government is trying to sell Air India, but it has not been sold yet due to lack of buyers. Airlines like Air Sahara, King Fisher, East-West Airline, Skyline NEPC, Modiluft etc. have been closed earlier. In such a situation, we can say that the state of affairs of the aviation sector is not as good as general people think. There are still many difficulties in making airlines the transport of the common man. The negative aspect of this industry is that this is also not safe and trustworthy in terms of security and compensation.

The writer is the Chief Manager in the Department of Economic Research at the Corporate Centre of State Bank of India, Mumbai. Views expressed are personal

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