An aircraft of India's Jet Airways lands
An aircraft of India's Jet Airways lands in Mumbai on September 20, 2017, in rain. India's first private airline's future looks cloudy as potential investors have shown reluctance to come up with viable bids. PUNIT PARANJPE/AFP/Getty Images

Jet Airways' ballooning of liabilities including debts and outstanding payments to vendors and various service providers seems to be dampening the enthusiasm of potential investors. While the value of the grounded airline's assets are steadily eroding as they remain idle, the liabilities are mounting and the rescue plan piloted by the lenders seems to be losing steam amid pressure to take deep haircuts. The longer the airline remains grounded, the longer it would take to turn it around, according to aviation sources.

"Liabilities and losses are considerable" Rajnish Kumar, chairman of State Bank of India that heads the lenders' consortium, told Bloomberg TV in an interview. "All these past liabilities and then, profitably, can they fly in future? These are some of the considerations which are weighing upon the minds of the potential investors."

The consortium that controls just over 50 percent stake in the defunct airline after a debt-equity swap, has put Jet Airways with about Rs 10,500 crore debt on its books up for sale. India's first private airline has been the victim of pitched price wars that new budget airlines ignited in one of the world's fastest-growing aviation markets.

The airline, once India's biggest by market cap, stopped all flights from April 17 after the number of airworthy aircraft available dwindled to single digits. Leasing companies began reclaiming aircraft over defaulted payments making them unavailable to the airline that once boasted a fleet of almost 120 planes. The full-service airline's loss of altitude was not abrupt and it incurred losses in nine of the past 11 years while the new budget rival IndiGo rapidly gained market share to become the biggest.

State Bank of India, SBI
A State Bank of India branch in Gurugram. The bank heads the lenders' consortium that is piloting a rescue plan for grounded Jet Airways.IANS

The lenders have offered up to 75 percent stake in the Naresh Goyal-founded airline to the new investor. The deadline for submission of binding bids to take over the ownership of Jet Airways is May 10. The lenders' consortium, to which the airline owes more than $1 billion, face the dilemma of deciding how much of the debt it should write off, Kumar said.

The airline has failed to pay the staff for several months now and has been steadily losing experienced pilots and senior engineers to rival airlines, which are also taking over the flight slots of Jet that are being re-allotted.

It's not merely the size of the liabilities that are deterring the potential investors. The apparent legal and regulatory ambiguities seem daunting. UAE national Etihad Airways, the strategic partner with 12 percent stake in Jet after debt restructuring, is worried that further investment may take its stake beyond the 25 percent threshold that will trigger the obligation for a mandatory open bid for a controlling stake.

The Supreme Court's stay on a circular of the Reserve Bank of India (RBI) allowing the debt-equity conversion, is also clouding the scenario. Private equity firms TPG Capital and Indigo Partners and state-owned investment fund National Investment and Industrial Fund (NIIF) are also in the fray after submitting their expressions of interest (EoI).