jet airways
A Jet Airways plane. The grounded airline's prospective investors are worried by the lack of clarity on the regulatory, financial and legal fronts. [Representational Image]SAJJAD HUSSAIN/AFP/Getty Images

The bidders to the grounded Jet Airways are reportedly unhappy about the lack of clarity caused by a host of developments since the State Bank of India (SBI)-led lenders' consortium announced the stake sale. They are particularly worried about the speed with which the aviation regulator is redistributing the lucrative slots of the crisis-hit Jet to rival airlines. Most of the rivals have announced plans for flights on these sectors from Mumbai and Delhi airports and are acquiring new planes on a lease, according to observers.

"The most important question now is what will the winning bidder find in Jet?" an identified source told the Economic Times. "More than 400 lucrative flight slots at the Delhi and Mumbai airports are being allocated to other airlines."  Though the authorities say the redistribution is temporary, it may not be easy to convince the investors, who are already worried about the erosion of asset value of the airline that is no longer flying.

The Supreme Court's order setting aside Reserve Bank of India (RBI) circular on stressed assets based on which the Jet lenders have gotten the board's assent for a debt-equity swap has caused uncertainty about the fate of the stake sale move. The lenders offered the bidders up to 75 per cent stake including the 50.1 per cent stake they hold in the stricken airline.

"The proposed debt-to-equity swap to lenders hasn't happened yet; the lenders still control just above 31 per cent of shares that have been pledged by the promoter (Naresh Goyal)," the report said quoting an aviation source. "The lenders' reluctance to give any interim funding to Jet casts serious doubts on their intentions," he added.

Jet Airways
Jet Airways aircraft are seen parked at the Indira Gandhi International Airport in New Delhi, India, April 13, 2019. The debt-laden airline has been forced to stop all operations. REUTERS/Anushree Fadnavis/File Photo

The threat by a service provider to drag Jet to the insolvency court over payment dues may also affect the confidence of the bidders. Proceedings in the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC) could take time once begun. Rajan Rakesh & Bros, the operational creditors to the Mirador Hotel Group, has threatened the launch of insolvency proceedings unless the airline cleared dues of Rs 25.68 lakh.

The bidders are UAE national carrier Etihad Airways, the only airline in the fray, private equity firms TPG Capital and Indigo Partners and state-owned investment company National Investment and Industrial Fund (NIIF). Jet Airways is weighed down by a debt burden of Rs 8,500 crore apart from Rs 3,500-crore outstanding payments to service providers and vendors. Jet was forced to ground all operations from April 17 after the lenders refused to release working capital following the oil companies' refusal to supply aviation turbine fuel (ATF) and aircraft lessors pulled out their planes from the operation. The airline has not paid the over 20,000 staff for months now and other airlines have been poaching senior staff like pilots and engineers at lower pays.

The fate of the wide-bodied Boeing 777 planes that Jet bought through financing from US EXIM Bank is also a matter of concern for the bidders who fear their repossession by the lender over default in payment. The investors have also been pushing for the domestic lenders to the Jet taking a haircut of up to 80 per cent.