16/04/2019

Jet Airways: Lessor repossessions gain speed as airline winds down operations

Jet Airways: Lessor repossessions gain speed as airline winds down operations

Lessors exposed to Jet Airways have deregistered 27 aircraft and filed requests for a further 20 in a race to regain control of their assets as questions mount over whether the airline can sustain operations.

The airline said late on 16th April that in view of its “critical liquidity position” its operations “have been severely impacted.” The statement, submitted to the Bombay Stock Exchange, came in response to a report by Indian television channel CNBC TV18 claiming that Jet was to “temporally shut down its operations." As Ishka goes to press, all of Jet’s aircraft bar two ATRs are on the ground.

Lessors have sought to deregister aircraft, but one aviation lawyer has warned Ishka that customs paperwork could severely delay how quickly lessors can gain full control of their aircraft.

According to Nitin Sarin, managing partner at aviation law firm Sarin & Co in Chandigarh, lessors could face significant delays if Indian Customs and the Reserve Bank of India fail to offer them the necessary approvals.

 

Stalled talks

 

Talks between banks and investors to rescue the cash-strapped carrier, until last year India’s second-largest by market share, have stagnated in recent weeks. Minority-owner Etihad reportedly threatened to leave the negotiating table last month (see Ishka’s earlier Insight) while this week state banks, until now poised to make the biggest contribution to the airline, have yet to agree on an emergency fund disbursement. According to India’s National Aviator’s Guild, more than 1,000 pilots have not been paid for three months.

If it was to go bankrupt, Jet Airways would be the largest airline by fleet size to become insolvent since Air Berlin. Ishka understands that Jet began 2019 with a fleet of 118 aircraft in operation of which 104 remain in India, including the ones deregistered or awaiting deregistration. That figure could stay the same for months due to lengthy processing times for export permits.

 

The rush to repossess

 

Dublin-based Avolon became on 5th April the first lessor exposed to Jet Airways to enforce IDERAs, an irrevocable deregistration measure that prevents a debtor from flying an aircraft under any jurisdiction and allows the applicant to reclaim their aircraft. Since then, nine lessors have succeeded in deregistering their aircraft and seven others have filed IDERA requests – Aircastle and Carlyle Aviation Partners being the latest ones on 16th April.

Aergo Capital, which last week filed IDERAs to deregister seven ATR72-500s, have since withdrawn the requests.

 

Click here to download the data behind the chart.

Jet Airways lessor deregistered aircraft as of 16 April 2019
Operator Owner Aircraft MSN Reg. Age
Jet Airways Aviation Capital Group 737-800 36846 VT-JBB 11.667
Jet Airways Aviation Capital Group 737-800 36847 VT-JBC 11.583
Jet Airways Aviation Capital Group 737-800 36551 VT-JBJ 9.75
Jet Airways Aviation Capital Group 737-800 36553 VT-JBK 9.5
Jet Airways Avolon 737-800 42799 VT-JFW 4.833
Jet Airways Avolon 737-800 42804 VT-JFY 4.667
Jet Airways Avolon 737-800 34798 VT-JGP 13.83
Jet Airways Avolon 737-800 34797 VT-JGQ 12.75
Jet Airways Avolon 737-800 29685 VT-JTC 11.417
JetLite Avolon 737-700 33025 VT-SIZ 14
JetLite Avolon 737-700 33026 VT-SJA 13.11
Jet Airways BOC Aviation 737-800 39055 VT-JFF 6.25
Jet Airways CDB Leasing A330-300 1361 VT-JWS 6.417
Jet Airways CDB Leasing A330-300 1370 VT-JWT 6.333
Jet Airways Fly Leasing 737-800 39069 VT-JFZ 4.583
Jet Airways Fly Leasing 737-800 42805 VT-JTA 4.417
Jet Airways Fly Leasing 737-800 39070 VT-JTB 4.417
Jet Airways MCAP 737-800 39059 VT-JFJ 5.917
Jet Airways MCAP 737-800 39060 VT-JFK 5.833
Jet Airways MCAP 737-800 39067 VT-JFM 5.667
Jet Airways MCAP 737-800 39063 VT-JFQ 5.333
Jet Airways Orix Aviation 737-800 42800 VT-JFX 4.667
Jet Airways SKY Leasing 737-800 39051 VT-JFD 6.5
Jet Airways SMBC 737-800 29668 VT-JGG 14.83
Jet Airways SMBC 737-800 37743 VT-JTE 10.167
Jet Airways SMBC 737-800 37745 VT-JTL 9.583
Jet Airways SMBC 737-800 37746 VT-JTM 9.417
Source: CAPA Fleets and Ishka Research

Source: CAPA Fleets and Ishka research

Click here to download the data behind the chart.

 

Click here to download the data behind the chart.

Jet Airways pending aircraft deregistration requests as of 16 April 2019
Operator Owner Aircraft MSN Reg. Age
Jet Airways Aircastle 737-800 35099 VT-JBD 11.5
Jet Airways Aircastle 737-800 35106 VT-JBE 11.167
Jet Airways Aircastle 737-800 35082 VT-JBF 11.83
Jet Airways DAE Capital 737-800 36694 VT-JBQ 9
Jet Airways DAE Capital 737-800 36695 VT-JBR 9
Jet Airways DAE Capital 737-800 36698 VT-JBS 8.583
Jet Airways SKY Leasing 737-800 39051 VT-JFD 6.5
Jet Airways Aircastle 737-800 30410 VT-JGA 16.583
Jet Airways Aircastle 737-900 30412 VT-JGC 16
Jet Airways Aircastle 737-800 34799 VT-JGR 12
Jet Airways Aircastle 737-800 34800 VT-JGS 12.5
Jet Airways Arena Aviation Capital 737-800 34801 VT-JGT 12.417
Jet Airways Arena Aviation Capital 737-800 34802 VT-JGU 12.25
Jet Airways Carlyle Aviation Partners 737-800 34803 VT-JGV 12.167
Jet Airways Carlyle Aviation Partners 737-800 34804 VT-JGW 11.917
JetLite CastleLake 737-800 33555 VT-JLE 15.4
JetLite CastleLake 737-800 33556 VT-JLF 15.4
Jet Airways DAE Capital 737-800 40233 VT-JTH 9.833
Jet Airways DAE Capital 737-800 40235 VT-JTK 9.583
Jet Airways DAE Capital 737-800 40236 VT-JTN 9.417
Source: CAPA Fleets and Ishka Research

Source: CAPA Fleets and Ishka research

Click here to download the data behind the chart.

 

Repossession paper jam

 

Thirteen leased aircraft left Jet Airways before repossessions began. According to Sarin, the return of those 13 aircraft (see table below) to their respective lessors was agreed with the carrier. “The airline essentially gave all the lessors an option for early termination of the leases,” Sarin tells Ishka.

 

Click here to download the data behind the chart.

Jet Airways leased aircraft leaving in India in 2019 as of April 16
Owner Aircraft MSN Reg. Age Comments Current country
CDB Leasing 737-800 36813 VT-JTF 9.75 Ferried Delhi to Ostrava via Tbilisi on Apr Mar 27 - 29 Czech Republic
GY Aviation 737-800 36815 VT-JTG 9.667 Ferried Delhi to Ostrava via Tbilisi on Apr Mar 27 - 29 Czech Republic
Orix Aviation 737-800 38029 VT-JFA 6.75 Ferried Mumbai to Ostrava via Tbilisi on Apr Mar 25 - 27 Czech Republic
GECAS 72-600 1064 VT-JCY 6.333 Ferried Ahmedabad to Sonderborg Jan 31 - Feb 3 Denmark
GECAS 72-600 1075 VT-JCZ 6.167 Ferried Ahmedabad to Sonderborg Jan 31 - Feb 6 Denmark
AerCap 737-800 35289 VT-JBH 10.167 Stored in Hyderabad on Feb 16, ferried to Jakarta via Mumbai on Mar 7. Re-registered in Austria as OE-IBS Indonesia
AerCap 737-800 30734 VT-JTD 11.333 Stored in Mumbai on Feb 27, ferried to Jakarta via Hyderabad between Mar 6 - 7 Indonesia
Falak Investments 737-800 29639 VT-JGF 14.25 Stored in Mumbai on Feb 15, ferried to Shannon via Tbilisi between Mar 15 - 19 Ireland
GECAS 737-800 36817 VT-JBM 9.583 Ferried Mumbai to Singapore on Feb 9, due for Nordavia Regional Airlines in Russia as VQ-BBV Singapore
GECAS 737-800 36818 VT-JBN 9 Ferried Mumbai to Singapore on Feb 8, due for Nordavia Regional Airlines in Russia as VQ-BBW Singapore
GECAS 737-800 36819 VT-JBP 9.417 Ferried Mumbai to Singapore on Feb 23, due for Nordavia Regional Airlines in Russia as VQ-BBY Singapore
Altavair A330-200 956 VT-JWQ 10.583 Ferried Mumbai to Madrid on Apr 10 for storage Spain
GECAS 737-800 32579 VT-JGK 17.5 Location unknown. Last recorded flying over China. Unknown

Source: CAPA Fleets and Ishka research

Click here to download the data behind the chart.

 

However, after the departure of Naresh Goyal from the airline’s board Jet Airways’ management changed direction. “The new board of Jet said ‘sorry, that’s no longer optionable and we want to continue flying the aircraft’,” Sarin explains. What followed is the ongoing wave of repossessions.

But taking deregistered aircraft out of India may prove to be a complicated task. Sarin, whose firm carried out the first repossession of a helicopter in India under Cape Town-compliant deregistration rules, said the entire process took around five months.

“The deregistration [of the helicopter] happened very quickly, but we however faced many issues with customs and the Reserve Bank of India getting the necessary export approvals from them,” Sarin says, adding that India’s customs and “other authorities” are not yet aligned with Cape Town. The Indian Parliament is yet to formalise a Cape Town Convention implementation bill to address this (see Ishka’s earlier Insight).

“It is anybody’s guess if these [Jet Airways] aircraft will face the same pushback from customs and the RBI,” Sarin remarked.

 

The Ishka View

 

Lessors appear to have lost confidence in Jet Airways’ ability to recover and have been busy preparing to repossess their aircraft. However, this may not be a quick process, as the sluggish export of a recent repossessed helicopter shows. A lot depends on the speed and willingness of Indian Customs and the Reserve Bank of India’s to offer lessor the necessary approvals. If efforts to rescue the airline succeed, and lessors repossessing aircraft do experience delays they may be incentivised to retrace their steps. Rather than face a lengthy repossession and remarketing process, they could opt to lease their assets back again to Jet.

When low-cost Indian carrier SpiceJet came near bankruptcy in early 2015, some lessors seeking relief in court over DGCA deregistration delays ultimately reached agreements with the airline to continue leasing those aircraft. While the DGCA is no longer an issue for lessors, as the speedy deregistrations under new rules show, export delays could push lessors towards Jet if the carrier recovers.

But Jet Airways will face a difficult road to recovery. Its current business model appears unsustainable in the current fare environment (see Ishka’s earlier Insight) and its recent troubles are leaving parts of its business up for grabs. Pilots are reportedly leaving for other airlines, its slots at Heathrow have been passed on to Etihad, rival airlines SpiceJet and IndiGo are reportedly looking to take slots in Delhi and SpiceJet has been eyeing Jet’s 737 NGs to replace grounded MAXs in its fleet.


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