Further troubles for Jet Airways: Collapse appears likely

India’s Jet Airways appears set for a complete collapse. Debtors are no longer willing to trust that they will be paid eventually and are taking more drastic efforts to secure some of the funds they are due. Aircraft are no longer just grounded; they are being repossessed. Fuel is hard to come by. Crew are pursuing legal actions. Despite a promise of capital infusion from the State Bank of India the rescue funding is not yet available to the carrier. There is roughly zero good news for the carrier at the moment.

Impounded Planes

The latest aircraft trouble came at Amsterdam’s Schiphol Airport on Wednesday when one of Jet Airways’ 777s, VT-JEW, was impounded by a European cargo firm, according to reports. This move follows the airline’s move to ground the majority of its aircraft over the past couple months due to an inability to make lease payments.

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While the airline initially reported that the associated lessors supported the move it seems that is no longer the case. Rather than leaving the planes idle in India while awaiting payment the owners are now pushing to deregister the aircraft and fly them out of the country.

Increased demand for single-aisle aircraft on the short-term lease market – owing to the 737 MAX grounding – is one factor supporting the move. But the overall expectation that Jet Airways cannot recover from the current situation also is driving that decision.

As on 10.4.19 – De-registered: VT-JGQ, JGP, JFJ, JFP, JFQ, JFM and JFK. Awaiting de-registration (within 5 working days of application by owner): VT- JGG, JTE, JTL, JTM, JCJ, JCK, JCL, JCM, JCN, JCP, JCQ, JBJ, JBK, JFF, JBB, JBC, JTA, SJA, JFW, JFY, JTC, SIZ, JTB #jetairways

— Nitin Sarin (@Deaphen) April 10, 2019

With fewer planes flying and India’s major airports facing heavy competition for landing slots the country’s aviation regulator took the extraordinary step of reallocating some of those slots to other carriers. While that move is theoretically temporary it now appears unlikely that Jet Airways will ever return to operating its prior portfolio of services.

Reduced Services

The few planes still flying are not operating with the full complement of services. The Indian Oil Corp halted delivery of jet fuel to the airline on Wednesday afternoon over non-payment. The supplier similarly halted deliveries last Friday, though terms were eventually worked out.

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While less critical to operations, Jet Airways also cut its inflight entertainment content as of the beginning of the month. Or, perhaps more appropriately, it had its content cut off by supplier Global Eagle. At the Aircraft Interiors Expo last week in Hamburg Global Eagle CEO Josh Marks offered tepid support, noting that the new management team’s plan and “that the State Bank of India, the parties driving the rescue plan, are making progress.” Those words were countered by the company’s actions.

Global Eagle is no longer supply that content, owing to the significant debt that is unlikely to be paid. The ever worsening circumstances also cast further doubt on plans for Global Eagle and Jet Airways to execute on their contract to launch inflight wifi connectivity in India later this year.

Where’s the money?

Theoretically these cuts were unnecessary as the State Bank of India (SBI) agreed to a funding plan to stabilize the operation. That was supposed to bring more than $200 million into the airline’s operations. But the money has yet to materialize. Instead, the SBI is now working to find other investors who would help backstop that cash and take a more significant position in the recovery process. As the airline’s troubles deepen with each passing day the likelihood of finding a new investor willing to spend that cash diminishes.

Perhaps a couple months ago, when the troubles were first brought to light, a successful recovery plan could have been initiated. Posturing in the Board Room led to delays in the restructuring and that opportunity now appears to have passed the carrier by. The real question now appears to be just how long this setback with affect growth in the Indian aviation market, not whether Jet can recover from this mess.