Jet Airways' investors are cheering this week's government-led rescue deal, but the cash-strapped Indian airline's future looks mired in uncertainty as convincing a new investor to come on board may not be easy.
The airline, which was on the brink of bankruptcy, was bailed out on Monday by state-run banks, which have temporarily taken a majority stake in the company, given it a new loan of $218 million and forced its chairman, Naresh Goyal, to step down from the board of the airline he founded 25 years ago.
Jet shares have rallied 20 percent since news of the rescue on hopes that the airline would now be able to clear salaries, redeploy grounded planes and claw back market share.
Its future is far from certain though, as a consortium of banks led by State Bank of India now rushes to find a new investor and sell its stake in the airline.
This may not be easy especially with Goyal still holding a 25.5 percent share in Jet, which gives him the legal right to block key decisions including raising capital, issuing new shares and diluting equity.
If a deep-pocketed investor is not found soon, Jet may struggle for funds again as the interim loan given by the banks will not last for very long, say lessors and analysts.
"Right now Jet is in survival mode, there is no strategy," said an executive at one of Jet's lessors. Jet has been in talks with the lessor since securing the deal but it has given few details on settling pending lease payments and on its turnaround plans, he said.
"The important thing for us to know is if the airline has somebody who is patient, capable and has the financial muscle to revive it," he said, adding his company is yet to decide whether to keep the aircraft they grounded tied to Jet.
Once India's leading full service carrier, Jet has struggled to compete with low-cost carriers in recent years. The airline's market share has nearly halved to 11.4 percent from 21.2 percent in 2016 and it has been forced to ground about two-thirds of its fleet leading to hundreds of flight cancellations.
Indian conglomerate Tata Sons had been in talks to invest in Jet on the condition that Goyal would step down, or take a less prominent role, sources told Reuters in November. While the rescue deal could put Tata back in the race, Goyal's trimmed stake may still be a problem.
"Are you not creating a huge hurdle for the potential investors?" said a senior government official, reacting to the bank-led bailout in which Goyal still has a stake.
India also wants a domestic investor to replace the banks, which rules out potential deep-pocketed suitors like Qatar Airways but the government-backed National Investment and Infrastructure Fund, whose shareholders also include Abu Dhabi Investment Fund, is still in the fray, sources have said.
State Bank of India Chairman Rajnish Kumar has said Goyal would not pose a problem for any incoming investor but also said that the former chairman would be allowed to bid for the banks' shares when they are auctioned, leaving a window open for the founder to come back.
The bank was not immediately available for comment.
In a fresh sign of its weak financial situation, just days after the bailout, Jet told the Indian stock exchange on Thursday that it had defaulted on an overseas loan due to "temporary liquidity constraints". Local media reported that it was a loan of $140 million.
Saving the airline is crucial for Prime Minister Narendra Modi as he looks to avoid thousands of job losses ahead of a general election.
"This is just a band-aid until the elections," said a source close to Jet. "We don't know if this bailout will work," he said, adding that Jet is like a hot piece of coal for the banks which they want to drop as soon as possible.
Several Jet pilots, who have not been paid for months, have switched airlines, and rival carriers like SpiceJet have been in talks with Jet's lessors to take some of its grounded planes on lease, a source has told Reuters.
Jet has assured Indian authorities that no more planes will be grounded and that it is in talks with lessors to have a total of 75 planes back in the air by end-April from about 35 today.
"The current funding measures are short term and will not bring much confidence till a new investor is on board," said Kapil Kaul, India CEO at aviation consulting firm CAPA.
"Process of returning (Jet's) fleet back to the system might not be easy especially since the aircraft can be deployed easily to other airlines or markets," said Kaul.