Lenders of Jet Airways threaten bankruptcy over aircraft rental revenues

Lenders of Jet Airways led by the State Bank of India could push the airline into liquidation if the winning bidder, the Jalan-Kalrock consortium, disagrees on distributing the proceeds from aircraft rentals among the financing banks, The Economic Times has reported.

Jet Airways owes a lot of cash to many lenders and stakeholders, including ex-employees and ticket claimants. So, any source of revenue for the airline is being carefully observed, with attempts being made to direct the funds to those demanding their money back.

Aircraft rentals to Air Serbia have, so far, yielded about INR 108 crore. The amount is parked with the SBI. The report said the banks conveyed to the winning bidder that they would apply for liquidation if lease rentals were not distributed to the verified lenders, citing sources.

Lenders of Jet Airways threaten bankruptcy over aircraft rental revenues

The Jalan-Kalrock group has proposed INR 380 crores in phased payments. These include a one-time payment of INR 185 crores and a two-year payment of 195 crores following the implementation of the plan.

Additionally, lenders would get a 9.5% ownership of the airlines. However, a portion of the money used to pay the creditors comes from the sale of assets belonging to Jet Airways. Only 5% of the lenders’ claims are recovered, which limits the negative effects of a firm liquidation.

The Jalan-Kalrock consortium has sought time until next week for a decision. The resolution plan approved by the National Company Law Tribunal (NCLT) is silent on the distribution of the lease rentals, leading to a dispute between the lenders to the distressed airline and the winning bidder.

Jet Airways was grounded in April 2019 due to its failure to pay for fuel and lease rentals.

Although the NCLT approved the Jalan-Kalrock plan in June 2021, the consortium has not yet paid the lenders. As the new owner of Jet Airways was working on receiving regulatory clearances, the implementation of the plan was delayed.

Civil aviation regulator Directorate General of Civil Aviation (DGCA) reinstated Jet’s air operators’ certificate in May 20222. Jet Airways was grounded in April 2019 due to its failure to pay for fuel and lease rentals.

ALSO READ – Jet Airways nearing a deal to buy 50 A220 jets from Airbus

Jet Airways is near a deal to buy 50 A220 jets from Airbus. “We are in an advanced stage of discussions with lessors and OEMs (manufacturers) for aircraft, and we will announce our aircraft choice and fleet plans as we make our decisions,” a spokesperson for Jet Airways said.

(With Inputs from The Economic Times)

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