New Delhi: Acquiring grounded aircraft in India remains a significant challenge, said two senior executives of the Challenge Group, which recently got court approval to acquire three wide-body aircraft of grounded Jet Airways after a delay of more than a year.
“Unfortunately, it’s already been two years. It’s a very long period and the process has created a lot of difficulty for us due to court battles and disagreement between the lenders and Jalan Group on some elements. We just see ourselves as somebody who’s suffering because it creates risk for our plan to convert those aircraft. Maybe we have to step back and go take something else from the market for those assets that are still available,” Eshel Heffetz, chief executive, Challenges Airlines, said in an interview.
The freighter aircraft operator was one of the bidders for the three Boeing B777-300 ER aircraft of Jet in the auction organized by the monitoring committee of the airline in 2022.
However, the finalization of the deal was put on hold following a legal tussle between the lenders and the winning bidder, the Jalan-Kalrock consortium, which prevented the transfer of ownership of the airline. However, the firm got relief last month with the National Company Law Tribunal ordering the monitoring committee to initiate the sale of the three aircraft to Ace Aviation, the special purpose vehicle of the Challenge Group which had submitted the bid for the aircraft.
In 2022, attempts were made to sell 11 aircraft owned by Jet Airways, including five Boeing B777-300 ERs and three B737-800s, and three Airbus A330-200s. However, the interest was limited considering the poor maintenance of the grounded aircraft since April 2019.
“In parallel to the B777, we saw an additional five airplanes in the auction last year, and the appetite in the market for those assets was very limited. Maybe it was below expectations of the monitoring committee, and the aircraft are still there on the ground… You have to invest money to activate them in the future. If you don’t do it, well, then you have nothing in hand. It is just metal with corrosion,” Heffetz said.
The company has signed a letter of intent for nearly ₹400 crore to buy the three aircraft but is staring at further headwinds as the aircraft grounded for over four years will require 8-12 months to become airworthy and flown out of India. It will take some more time to convert the passenger planes to freighters, the company said.
“…the more you wait, or the more the aircraft is on ground, it loses value and eventually you reach a point when the value of the assets is zero or sometimes even minus. We believe that those three assets were almost there if the court would have theoretically decided differently or would have thought of waiting a little bit longer,” Michael Koish, the chief investment officer of Challenge Airlines, said.
However, the cargo air operator said it is still keen to buy the other two B777 aircraft, but is awaiting further clarity from the monitoring committee on the norms to be followed for the auction.
The company, with bases in Israel, Belgium and Malta, is set to start a cargo service on the Mumbai-Hong Kong route, and eventually expanding it to Hong Kong-Mumbai-Tel Aviv five times a week.
“This is just the first step in the Indian market. After that maybe we will continue with an additional stop in Delhi and can look at India-Europe as well,” Koish added.
While the risk appetite of aircraft lessors for the Indian market has improved since the days of the Kingfisher Airlines collapse in 2012, global aircraft lessors are closely following the asset recovery process of Jet Airways to fine-tune their strategy for Indian airlines, Koish said.
“We hear a lot of feedback from our colleagues from the big lessors… I think that ours is like a study case for them on the legal side and beyond. I think that India is doing a few steps which are quite positive but in the end of the day it’s all about the whole process and a combination of steps,” Koish added.
In October, the ministry of corporate affairs amended the insolvency and bankruptcy code to allow aircraft lessors to recover aircraft during insolvency proceedings, but the Delhi high court is yet to provide clarity on whether the order has been implemented with retrospective effect, thus allowing grounded airline Go First’s lessors to retrieve their assets or not. However, the Indian civil aviation regulator has said in a recent legal response towards a writ petition that it views the order to be retrospective but awaits clarity from the court.
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Updated: 07 Nov 2023, 11:50 PM IST