Jet Airways 737 MAX in hangar

Jet Airways is still talking with engine and aircraft manufacturers. Photo: Getty Images

Jet Airways has to iron out some issues before launching operations later this year. The airline’s new owners, the Kalrock-Jalan consortium, were keen on launching the airline in September, but ongoing talks with engine and aircraft makers and previous lenders are reportedly delaying the plans.

Talks on with engine makers

Jet Airways (Jet) is unlikely to relaunch operations this month as it is still negotiating terms and contracts with aircraft and engine makers. The team led by the Kalrock-Jalan consortium is working hard to resurrect the airline following its bankruptcy in 2019.

Since then, it has taken numerous steps, including getting the insolvency resolution plan approved by the National Companies Law Tribunal (NCLT) in June 2021 and getting the air operator certificate (AOC) earlier this year.

However, navigating through its past baggage and finalizing aircraft and engine deals is proving to be a little trickier than anticipated. Jet’s new chief Sanjiv Kapoor commented,

“Starting or restarting an airline is a complex business and we want to be sure we take the time to get the best possible terms and contracts for both aircraft and engines, including maintenance contracts, as well as to receive aircraft configured the way we want them, to meet our strategic requirements and to secure our future. If that takes a little more time to get right, that is fine. As the saying goes, ‘act in haste, repent at leisure.”

Negotiating costs

According to a report by The Economic Times, Jet wants engine makers Pratt & Whitney or CFM to bear a larger share of the costs whenever an engine is replaced. It notes that new engines like P&W’s GTF and CFM’s Leap are replaced more frequently than their predecessors, especially in the environmentally harsh conditions in India.

An executive at an engine maker told ET,

“Negotiations have been on for weeks. Jet does want its pound of flesh.”

Jet Airways Boeing 737 parked

Jet is looking at engine contracts carefully. Photo: Getty Images

Another person familiar with the matter said that the contractual terms in the leasing contract would also influence those in the ultimate purchase contract for engines. Jet is probably looking at the contracts very carefully and wants to avoid a situation of having to spend more on engines than airframes.

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Problems with lenders

Another possible roadblock for Jet at the moment seems to be its previous lenders, who are still owed large sums of money.

In July, the group of lenders threatened the carrier with insolvency if it did not pay them the proceeds from rentals of its aircraft. Led by the State Bank of India, the lenders’ consortium has stated that they will provide a no-objections certificate to Jet only after the new owners commit to a timeline for implementing the debt resolution plan.

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Jet Airways CEO said on Twitter that they’re working towards starting sale soon. Photo: Faisal Akram via Wikimedia

However, Jet’s new owners believe that the NCLT proceedings have no influence on the carrier’s future plans and business. The airline is busy working out the last-minute details and hopes to open for sale by October.

What are your views on this? Please leave a comment below.

Source: The Economic Times


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