‘Getting grounded aircraft in India is a big struggle’ – Gudstory

“Unfortunately, it has been two years. This is a very long period and the process has created a lot of difficulties for us due to court battles and disagreements on certain elements between the lenders and Jalan Group. We see ourselves as the only one who is suffering because it poses a risk to our plans to transform those planes. Maybe we have to step back and take something else from the market for the assets that are still available,” Challenger Airlines Chief Executive Eshel Heifetz said in an interview.

The cargo aircraft operator was one of the bidders for Jet’s three Boeing B777-300ER aircraft in the auction conducted by the airline’s monitoring committee in 2022.

However, finalization of the deal was halted after a legal tussle between the lenders and the winning bidder, Jalan-Kalrock Consortium, prevented the transfer of ownership of the airline. However, the company got a reprieve last month when the National Company Law Tribunal ordered the monitoring committee to initiate the sale of three aircraft to Challenger Group’s special purpose vehicle Ace Aviation, which had submitted bids for the aircraft.

In 2022, an attempt was made to sell 11 aircraft owned by Jet Airways, including five Boeing B777-300ER and three B737-800 and three Airbus A330-200. However, interest was limited given the poor maintenance of the aircraft, grounded since April 2019.

“In parallel with the B777, we saw an additional five airplanes go to auction last year, and market appetite for those assets was very limited. Perhaps it was below the expectations of the monitoring committee, and the planes are still on the ground… You will have to invest money to activate them in the future. If you don’t do this, well, you have nothing in your hands. It’s just corroding metal,” Heifetz said.

The company has signed a letter of intent for approx. Rs 400 crore will have to be spent to buy the three aircraft, but there are headwinds ahead as the aircraft, which have been parked for more than four years, will need 8-12 months to become airworthy and fly out of India . The company said, it will take some more time to convert passenger planes into cargo planes.

“…the longer you wait, or the longer the aircraft remains on the ground, its value decreases and eventually you reach a point when the value of the asset is zero or sometimes even less than zero goes. “We believe those three assets would have been almost where they were if the court had decided differently in principle or thought about waiting a little longer,” said Michael Koish, chief investment officer of Challenge Airlines.

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 criteria to be followed for the auction.

The company, which has bases in Israel, Belgium and Malta, is set to launch cargo service on the Mumbai-Hong Kong route, and eventually expand it to Hong Kong-Mumbai-Tel Aviv five times a week.

“This is the first step into the Indian market. “After that we will probably continue with an additional stop in Delhi and maybe even look at India-Europe,” Koish said.

Koish said the risk appetite of aircraft lessors for the Indian market has improved since the days of the collapse of Kingfisher Airlines in 2012, but the global aircraft lessor will need to fine-tune its strategy for Indian Airlines to acquire the Jet Airways assets. Following the recovery process closely.

“We hear a lot of feedback from our colleagues from larger lessees… I think our case is like a study case for them on the legal side and beyond. I think India is taking some steps which are quite positive but at the end of the day it is about the whole process and combination of steps,” Koish said.

In October, the Corporate Affairs Ministry 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 how the order will be implemented. Whether applied retroactively or not, permission has been granted to the airline flying such. Go first to see if the lessor repossessed his property. However, the Indian civil aviation regulator in a recent legal response to a writ petition said it considers the order retroactive but is awaiting clarity from the court.

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Updated: 07 November 2023, 11:50 PM IST