Jet Airways’ asset monetization plan has been hit by an impasse between creditors and the Jalan-Kalrock consortium over the contours of its resolution plan.
ET has learned that the airline has shelved a plan to monetize the assets, which include 11 aircraft (5 Boeing 777s, 3 Boeing 737s and 3 Airbus A330s) as well as aircraft engine spare parts.
While the bidding process for the assets was floated in August and about a dozen bidders did due diligence, Jet Airways’ monitoring committee, which includes banks and Jalan-Kalrock representatives, delayed the process for about 90 days.
The reprieve comes after the National Company Law Appellate Tribunal (NCLAT) ruled that all eligible employees must be paid their pension fund and gratuity amounting to around Rs 275 crore.
While the banks want the consortium to pay the additional amount, the consortium said it is not responsible for it.
Differences also emerged as the consortium failed to pay the first tranche of 185 million rupees to lenders and also claimed rent accrued from Air Serbia, which had leased three Boeing 777 aircraft to Jet.
The creditors, for their part, have refused to hand the company over to the consortium before they receive payment.
“When the bidding process started, there were a dozen serious bidders for the plane. As the industry opened up post-Covid-19, there was a vibrant secondary market for the broad market. Now, after this delay, there is a huge question mark over how much value the aircraft will generate,” said an executive at the aircraft sales company.
Long-term grounding of aircraft significantly reduces their value.
As part of the resolution plan, it was intended that the profit from the sale of the 11 aircraft and spare parts would be used by the Jalan-Kalrock consortium to pay creditors.
Under the plan, up to Rs 500 crore in revenue would be pumped into the company, while anything above that would go to creditors.
Creditors of former airlines were significantly reduced by 95% in the process of resolving the crisis.
Of the total admitted claim of over Rs 7,800 crore, the consortium offered to pay them Rs 380 crore in two tranches, of which Rs 185 crore was to be paid within 180 days of the effective date.
“It has been mutually agreed that we will not go ahead with the sale now as none of the creditors or employees have been paid yet,” said a person connected to the Jalan-Kalrock consortium.
However, the stalling of the monetization plan further underscores the growing differences between the airline’s creditors and the consortium, pushing it further towards liquidation, industry experts said.
“The consortium is ready with the money to be given to the banks, but they have not agreed. According to the consortium, the effective date was May 20 and the cycle began then. Now we will tell the court that since this impasse has wasted six months, we should get another two months. Or, if the court gives a new effective date, it will start another 90-180 day cycle,” the person added. But it won’t be easy. “…legally there can be no retroactive declaration of the effective date, nor any retroactive extension of the effective date. Therefore, I cannot foresee any legal outcome other than liquidation,” said Rahul Kamerkar, lawyer representing the Jet Maintenance Engineers Welfare Association.