Flight Plan

Untangling the Jet Airways slot knot

K Giriprakash and Forum Gandhi | Updated on May 02, 2021

Up in the air: When Jet Airways suspended its operations, it had 750 slots, most of which were given away to domestic airlines   -  THE HINDU

Resolution of slot re-allotment is needed for the revival of the beleaguered airlines and the future of other carriers

The weather is still cloudy, as far as Jet Airways is concerned. Consider these two conflicting statements. Two years ago, the Ministry of Civil Aviation (MoCA) said vacant slots of Jet Airways across airports would be allocated to other airlines on a “purely temporary basis”.

“The historic rights of Jet Airways, as per the Aviation Ministry guidelines for slot allocation, will be protected,” it added. The slots would be made available to Jet Airways as and when they revived operations, it said in April 2019.

In March this year, the MoCA and the Directorate General of Civil Aviation (DGCA) said in an affidavit before the National Company Law Tribunal that Jet Airways could not claim historical precedence over airport slots.

Clearly, the conundrum about the slots, the most prized possession of any commercial airline, is still to be resolved.

Today, the National Company Law Tribunal (NCLT) will again take up the issue of slot re-allotment for the airline. The resolution of this issue is pivotal to the revival of Jet Airways. The operations of the airline were suspended in April 2019 after the potential promoters failed to come up with a tangible solution to repay the $1.2 billion debt it had accumulated.

A slot is a date and time at which an airline’s aircraft are permitted to depart or arrive at an airport. When Jet Airways suspended its operations, it had 750 slots, most of which were given away to domestic airlines. SpiceJet was the biggest beneficiary of this, and bagged the highest number of slots in the country’s busiest airport, Mumbai.

Significant, however, is the fact that while the ministry and the DGCA have reversed their stand claiming that too much time has elapsed for Jet to reclaim the slots and doing so could take the existing airlines down the path of bigger losses, several analysts believe that the winning bidders of Jet Airways cannot be left to fend for themselves either.

“Even after several months after the potential promoter came on board, we still have no clarity on the flying slots. This inordinate delay is very worrisome and can adversely affect the revival efforts of Jet,” Prof VK Unni, professor of Law at IIM Calcutta, told BusinessLine.

After a long winding bankruptcy proceeding, the lenders in October 2020 managed to approve the acquisition of the airline by a consortium comprising Dubai-based businessman Murari Lal Jalan and London-based asset management company Kalrock Capital which agreed to revive the airline at a cost of $136 million. As of now, Jet Airways has 11 aircraft on its fleet, according to various reports which further state that two are Airbus 330-200s, three are Boeing 737s and six, 777-300ERs.

There are two key principles for allotting slots. One factor is ‘historicity’, which means that when an airline operates certain slots, it gets similar slots in the next schedule. Under the second — the ‘use it or lose it’ philosophy — an airline must fly 80 per cent of the allocated slots during the scheduled period of six months or risk losing them.

Jet’s potential promoters have argued that the ministry had only “temporarily reallocated” these slots and indicated that the Insolvency and Bankruptcy Code (IBC) provides for a moratorium. But the ministry believes that the slots were never the property or assets of Jet Airways and thus cannot be subject to the moratorium or to the bankruptcy proceedings.

“In both cases (‘historicity’ and ‘use it or lose it’ principles) Jet Airways has nothing to show — because it has not operated a single flight in the preceding 23 months,” said a spokesperson for Sarin & Co, a leading legal firm which deals with airline litigations.

What is to be noted here is that perhaps for the first time in the history of Indian aviation, efforts are being made both by the government and the lenders to revive an airline. Unni said the successful resolution on the issue of slots for Jet Airways would send a positive message to India’s IBC regime. “Now with the MoCA invoking the ‘use it or lose it rule’ the matter has become more complex. Once the NCLT gives its approval it can take another six months for Jet to commence its operations,” he pointed out.

As this is the first airline undergoing a restructuring under the new insolvency and bankruptcy court, failure to come up with a solution that keeps the winning bidders and other domestic operators satisfied could lead to a situation wherein the potential owners of Jet Airways might just abandon their efforts to revive the airline.

K Giriprakash and Forum Gandhi

Published on May 02, 2021

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