Rival airlines are targeting various assets of grounded Jet Airways, including airport slots, highly-trained employees and aircraft, making the lenders’ task of reviving the debt-laden carrier by finding a suitable buyer an Herculean task.
Two low-cost airlines are aggressively hiring employees of the financially-crippled airline at much lower salaries and inducting aircraft to fill the vacuum created by Jet Airways, which was a significant player in the international and domestic markets till recently.
Even full-service carriers such as Vistara and Air India, which are saddled with more debt than Jet, are taking the opportunity to fill the void and enhance their market share.
With regard to Air India’s interest in leasing Jet’s grounded Boeing 777 aircraft, there is a debate already. Jet Airways owns 16 planes, including 10 Boeing 777-300 ER, that were financed by the U.S. Exim Bank. According to airline executives, Exim Bank has the first lien (first right to recoup its investment) on these planes. In which case, there is query on how SBI can lease out the aircraft when the bidding process was underway.
As of date, Jet’s promoter Naresh Goyal owns a 51% stake in the airline.
Hiring pilots
IndiGo has hired a number of pilots and senior level executives as well as other personnel from Jet Airways. On Friday, it organised a walk-in interview to hire more people. Similarly, SpiceJet, in a more aggressive manner, is inducting planes which were once leased to Jet Airways besides hiring its people. Almost all the airlines have, though temporarily, taken away Jet Airways’ slots at key airports, including at Mumbai and Delhi.
Almost 400 slots have been taken over by airlines ‘temporarily,’ subject to Jet Airways reviving its operations. SpiceJet, which had signed agreements to lease out 22 Boeing 737 planes which were earlier in Jet’s fleet, had also hired hundreds of Jet Airway’s employees.
SpiceJet recruits staff
“We have already provided jobs to more than 100 pilots, more than 200 cabin crew and more than 200 technical and airport staff. We will do more. We will also induct a large number of planes in our fleet soon.” said Ajay Singh, chairman, SpiceJet, in a statement. IndiGo did not provide any numbers.
The Hindu spoke to a number of Jet’s employees who said the low-cost airlines are offering salaries that are much less than what they earned.
“Mostly, it is 40 to 50% discount. Some are even offered 25% of the salary they were drawing at Jet Airways. The service conditions and work culture at those places are completely different. Only the desperate are joining,” said an employee asking not to be named.
“Airlines is a sector that thrives on someone’s carnage. Now, Jet is down, every other airline is taking as much it can at a discount,” said Mark Martin, CEO, Martin Consulting.
The suspension of flight operations at Jet Airways is likely to hit the resolution plan as bidders had reportedly started asking for more haircuts from banks considering the sharp value erosion. Analysts said the bidding process may receive only lukewarm response.
“Rather than extending the dates, the banks should have fast-tracked the bidding process. To me, the bank’s plans are high on optimism, low on realism and a fiasco in the making,” said Jitender Bhargava, former Executive director, Air India.
