The troubled Jet Airways seems to have found an interested suitor. The Hinduja Group has reportedly obtained the backing of Jet’s founder Naresh Goyal and key investor Etihad Airways to start the bidding process this week. It is further reported that the Hinduja Group will be deploying investment bankers, led by SBI Capital Markets, to commence the due diligence soon. Sources say that the Hindujas are prepared for the banks to take a consequential cut, as at the moment, preliminary calculations show that Jet’s debts are around ₹ 1200 crores.
The grounded airline, its banks and Naresh Goyal himself have seen a series of approaches to India’s top conglomerates being turned down over the last few months, with the most prominent one being from the Tata Group, who showed interest initially but it cooled off gradually. Sources close to the Hinduja family and Naresh Goyal, say that the two share cordial ties which span over more than the last couple of days. The Hinduja Group had previously shown interest in Air India when the heavily indebted government-run airline was put up for privatization. The Hindujas have had a prior run in the airline industry when they had tied up with Lufthansa Air Cargo to run the routes between India and Sharjah, between 1997 and 2000.
The current scenario
Jet doesn’t seem to have a lot of time on its hands, with several of its resources being drained with each passing day that the airline is grounded. Pilots and other staff are being actively recruited by the rivals, both in India and abroad. Adding to the troubles is the fact that the sought after international routes of Jet are being eyed by the other airlines. The Indian aviation regulator has already temporarily assigned many of Jet’s domestic routes to its rivals, with Air India being the biggest beneficiary as it got the busiest routes.
A source close to both parties has warned that while Hinduja showing interest might be a positive development, Jet can’t be confident of revival just yet. “Any person will have to wade through several levels of due diligence,” said the source, “Without the audited financial results, no investor can be sure of the gaping hole that is Jet’s accounts right now.”
The situation seems dire for Jet, as due diligence is sure to take some time, while the pilots are seemingly applying to different airlines. Sources report that at least 30 pilots flying long-distances for Jet have already applied to rivals like Qatar Airways, Rwanda Air, Korean Air and Turkish Airlines. Speaking of the domestic scenario, IndiGo, the only profitable Indian carrier, has already hired more than 30 Boeing 737 pilots from Jet. IndiGo had even offered signing bonuses of up to ₹ 15-20 lakhs to the Jet pilots, and surely the other airlines would be circling the pilots as well.
One major issue for any revival for Jet would be that the new stakeholders will have to start the rebuild from scratch, since the entire top management has already quit. This is where the support from existing stakeholders like Naresh Goyal and Eithad can play a crucial role in determining whether the airline can be revived if the Hinduja Group were to come on board. The Hindujas are also said to be waiting to determine the level of support from the government and the banks before making any final decisions. Another factor that would swing the Hinduja Group’s intent would be that whether their acquisition will lead to a majority control in the airline.