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REUTERS/Punit Paranjpe
Caged.
HOPE AGAINST HOPE

Why Etihad’s bid won’t be enough to save Jet Airways

By Niharika Sharma

The over 20,000 employees of Jet Airways, who haven’t received their salaries for over three months, will now have to wait for some more time before the fate of India’s oldest private airline is decided.

Today (May 14), Jet Airways said its deputy chief executive, and chief financial officer, Amit Agarwal has resigned “due to personal reasons.”

The resignation comes just days after the airlines’ lenders said they had received a tepid response to the bidding process to save the company.

On May 10, the first round of bidding for the now-grounded airline ended with the UAE’s Etihad Airways’ emerging as the sole bidder. And even that came with riders.

In its offer, the Abu Dhabi-based carrier said it’s ready to invest in Jet but won’t be the majority stakeholder. “Etihad Airways today confirmed its interest to re-invest in a minority stake in India’s Jet Airways, subject to conditions,” it said in a May 10 statement. “Etihad re-emphasises that it cannot be expected to be the sole investor, and that, amongst other requirements, additional suitable investors would need to provide the majority of Jet Airways’ required recapitalisation.”

The missing bidders

The response to the first round of bidding was underwhelming given that just a few months ago media reports had claimed that some of India’s biggest businesses were keen on buying Jet. Source-based news reports had named India’s richest man, Mukesh Ambani, and salt-to-software major Tata Group among suitors.

Even until last month, there were reports that Jet’s lenders had shortlisted at least four investors: Etihad Airways, TPG Capital, Indigo Partners, and India’s National Investment and Infrastructure Fund (NIIF).

Yet, only one serious bidder—besides two “unsolicited bids” from lesser-known investors with little aviation experience—emerged at the end of the day. “At this stage, there is no commitment from NIIF, they did send an email at the time of EoI (expression of interest) and they are nearly sovereign. So we will approach them. But any new investor who puts money will have to be convinced that there is a credible resolution plan,” Rajneesh Kumar, chairman of State Bank of India, said in an interview with a TV channel.

Etihad’s insufficient bid

Analysts doubt if even Etihad’s bid is enough to help Jet fly again.

“The situation is bad with assets already being transferred to other airlines like SpiceJet and this offer seems nothing more than eyewash,” Mark Martin, founder and CEO at Martin Consulting, told Quartz. “Etihad has been a minority partner in Jet and it’s difficult to assume that it wasn’t aware of the deteriorating condition of the airline. It seems Etihad submitted its bid just for the sake of it.”

Etihad had first invested in Jet in 2013 when it bought a 24% stake for Rs2,060 crore ($379 million). It also bought out 50.1% of the JetPrivilege frequent flyer programe in the same deal.

This time around, though, the airline’s commitment fell short.

“Etihad’s bid raises many questions, primarily about its seriousness over Jet,” said Harsh Vardhan, chairman of aviation consulting firm Starair Consulting. “It is not clear the nature of investment it’s willing to make. Just by stating that it will maintain its minority stake without roping in an actual majority holder will serve no purpose.”

Expressing concerns over Jet’s increasing liabilities, Vardhan said that it will be difficult for lenders to find a buyer in a “dead” airline. “Revival of Jet will remain difficult unless lenders focus on decreasing the liabilities and saving it from dismantling. As their staff has already started to leave, there isn’t much remaining to buy,” he said.

What next now?

With experts almost calling Jet a lost cause, the only ray of hope now is the unsolicited bidders who have reportedly reached out to Etihad Airways.

Lakshay Uttam, founder of Amsterdam-based hospitality firm My World Ventures, has contacted Etihad and expressed his interest to partner with the airline, Moneycontrol reported. He is part of a group of bidders, including British entrepreneur Jason Unsworth, and investment ventures Future Trend Capital Investments and Redcliffe Capital, which had submitted bids earlier but weren’t shortlisted.

Will SBI consider them now? Given the circumstances, that may be the only option to save Jet Airways.