Kalrock-Jalan group in rush to revive Jet Airways ahead of March deadline

Disagreements have emerged on funding pre-operative expenses which are necessary for DGCA approval

The consortium of UAE-based businessman Murarilal Jalan and UK based private equity fund Kalrock Capital is pushing ahead to restart operation of Jet Airways.

While, differences have emerged with lenders- , an SBI led consortium, over who would fund the pre-operative expenses to revive the airline’s license, the consortium has fastened preparation to get the airline’s license approved, sources said.

The licensing process, known as CAP 3100 has to be fulfilled by all operators looking to start scheduled air transport service and requires them to show that a system is in place to operate aircraft safely. This requires setting up an organisation structure, hiring pilots and cabin crews and having training and engineering set up in place.

Sources said that the airline applied to aviation regulator DGCA for recertification of its air operator certificate in the last week of January. The regulator is likely to inspect the airline’s preparedness to operate a flight in the second week of February following which it will be asked to operate a proving flight. A proving flight is operated by an airline to demonstrate the DGCA its ability to conduct the flight safely and in accordance with all rules.

“DGCA will evaluate all documents and manuals and carry out checks to assess the management capabilities from 14-17 February following which the proving flight will then be operated in the last week of February.

If things are on time, the airline will get back the license as early as 15 March," said a person involved in the process.

The consortium won the bid to revive the airline in October 2020 and got its resolution approved in June last year. However, seven months leter the process remains yet to be fulfilled. The effective date of implementation has been extended twice to 22 March. In case the consortium is unable to get regulatory approvals to start operations by then, the resolution plan will automatically lapse.

Last month, the consortium said that operations will restart with six narrow body aircraft in 2022 and become a hundred aircraft airline in five years.

“Jet Airways shut down due to financial reasons and not due to safety or technical reasons. It was not in default of any of the DGCA conditions and had passed IATA operational safety audits. Hence the process will be fast.” the person said.

The consortium has also completed other requisite processes like security clearance of three members of the new board, signing of letter of intent for aircraft, appointing departmental heads and getting letter of support from maintenance and repair organisations and pilot training facilities.

“Letter of intent for five Boeing 737 NG aircraft has been signed, while written letters of support have been obtained from MRO, pilot training centre and airports who are ready to offer slots and night parking. The Jalan- Kalrock consortium is showing full intent to restart Jet Airways even as there are ongoing differences with the lenders,” the person said.

The consortium did not respond to an email query on the topic.

However, a second person aware of the development said that differences have emerged as the Jalan-Kalrock consortium is not ready to invest funds before gaining control of the company while the lenders have stressed that they can only handover control after the new owners revive the airline’s license.

Last month, the consortium filed an application before the NCLT seeking directions that all expenses related to contracts related to IT, ground handling, cabin crew training should be borne from the airline’s available cash balance.

“While the winning bidders are of the opinion that they will not infuse equity into the company unless control is transferred and any expense of the company till effective date is to be borne out of the existing balance of the company, the SBI-led consortium is opposing it saying they cannot release any more cash,” the person said.

“So in the absence of any clarity, the consortium in its good faith is taking all steps to get the license revived,” he said, adding that Jet

Airways currently has a balance of over Rs 200 crore. One possible solution, the person said, could be where the lenders reimburses expenses incurred by the consortium. 

In December, the consortium had even approached NCLT saying that it is ready to infuse Rs 100 crore in the company and take control. However, the court didn’t agree saying that revalidation of the airline's permit is a condition precedent for the transfer of shareholding and extended the date of the process.

Some former Jet staffers however believe that the consortium is not serious about reviving the airline given the delays in funding.

An executive of a bank which is part of the resolution process said that the consortium was supposed to bring in Rs 350 crore as equity infusion within the first 180 days for expenses like payment to financial creditors and working capital expense. “We are not comfortable releasing any more funds. Let the court say that, then it's fine,” he said.