Jet Airways revival bleak after second round of bidding

The revival of grounded private sector airline, Jet Airways, seems bleak after the second round of bidding closed on Wednesday. The Committee of Creditors (CoC) has received only two bids from South American Synergy Group and Delhi-based Prudent AMC.

Of the two bidders that submitted an expression of interest (EoI) for the airline, one finds its place in the Paradise Papers and comes with a history of bankruptcies, the other has no public record of any big turnaround.

Sources in the know suggest that the Indian conglomerate Hinduja Group with primary interests in truck manufacturing, had also expressed initial interest in buying the airline company, but later withdrew from the fray, as they found no value addition in buying the airline carrier.

Synergy Group is headquartered in Sao Paulo, Brazil, with primary interests in the airline industry, aerospace, Oil and Gas, shipyard. Interestingly the major airline subsidiary of Synergy Group -- Avianca Brasil filed for the bankruptcy in June 2019 and grounded its operations -- two months after the Jet grounded its fleet in April 2019. Other than this, the company’s Argentinian subsidiary Avianca Argentina also suspended its operations due to financial stress in June 2019.

In November 2017, the company’s Bolivian-born CEO and founder Germán Efromovich found his name involved in Paradise Papers, a set of confidential electronic documents relating to offshore investment. The documents revealed that Efromovich and Synergy Group’s subsidiary Avianca Holdings are linked to an offshore conglomerate used for the aero-commercial holding business with ramifications in Bermuda, Panama, and Cyprus.

Other than Synergy Group, the CoC has received an EoI from New Delhi-based asset reconstruction company Prudent ARC. The company was founded in 2011.

This is the second time that the lenders to Jet had floated EoIs. The first round of bidding did not result in any resolution plan for the revival of the airline.

Shares zoom

Even as the airline is finding it difficult to find any bidder, the stocks of Jet Airways have surged in the past three months. The stocks of the company, on Thursday, closed at Rs 47.75 apiece, more than three times its historic low of Rs 15.10 on October 22, 2019.

“I believe the airline industry is headed for some contraction and that, while expanding the sector, will put existing airlines under margin pressure,” said Anubhav Shrivastava, Partner, Infinity Alternatives.

The airline grounded all its operations in April 2019, after it became unsustainable for the company to operate on the face of bulging debt in excess of Rs 8,500 crore. The airline was then taken over by the consortium of lenders led by the State Bank of India.