Challenge Group says it may pull out of Jet Airways aircraft deal, seek return of money with interest
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Michael Koish, Chief Investment Officer of Challenges Airlines, which won the bid for three of Jet Airways’ Boeing 777-300 aircraft, told Moneycontrol that the bankrupt airline’s monitoring committee has become unresponsive despite court orders to hand over possession of the aircraft.
The Malta-based Challenge Group, which had successfully bid for three Boeing 777-300 aircraft of the grounded Jet Airways, says its time and patience is running out after waiting nearly 19 months for the aforementioned planes.
“It’s really frustrating. We’re feeling that time is running out,” Michael Koish, Chief Investment Officer of Challenge Airlines, told Moneycontrol in an interview on May 16. He added that the National Company Law Tribunal’s (NCLT) judgment, due on May 17, will help the company map out its future course of action.
The Challenge Group had successfully bid for and executed Letters of Intent to purchase 3 B777-300 aircraft from Jet Airways in October 2022, through its special purpose vehicle Ace Aviation.
Last year Eshel Heffetz, CEO, Challenge Airlines, told Moneycontrol that delays in the sale of the aircraft may force it to look at other options.
Edited Excerpts from the interview follow:
It’s been nearly 19 months since you began fighting to take possession of the three planes you bid for. Why are you so keen on pursuing this deal?
When we started the process of bidding for the planes we didn’t think it would take so long to take possession. If we had known back then, we wouldn’t have gotten into this process.
But since we have already started, and have invested a lot of money, we are forced to stay and approach the Indian courts.
Plus, the Indian courts have ruled in our favour multiple times, which gave us the confidence to try again.
Now, more than one-and-a-half years later, nothing has really happened. So, it’s really frustrating. To answer your question, we’re feeling that time is running out.
Earlier this month you approached the National Company Law Tribunal (NCLT) once again. What was the reason behind moving the NCLT again?
Before I answer the question I want to share some background with you. Right from the start of the bidding process, we have worked with the monitoring committee of Jet Airways.
In good faith to conclude this deal at the earliest, we are not only willing but have spoken to all parties to share our views and hear the views of others
Because, at the end of the day, when you’re dealing with multiple parties, you have to negotiate a few issues. So, you sit down and you negotiate in good faith and you close it.
That’s what we do. That’s how we do aircraft. That’s what we do elsewhere around the world. That’s what we’re trying to do here.
Over the last year, we have had many discussions with the monitoring committee, with banks, the Jalan Kalrock consortium, and everyone.
However, around two months ago, after the Supreme Court’s order in our favour, the monitoring committee nominated a small working team to work closely with us because it’s easier to work in a smaller team and to negotiate.
However, the new team and the monitoring committee stopped responding to us. So, we don’t understand what’s going on here. On the one hand, we have the Supreme Court, a very clear decision to continue with the deal. On the other, nobody wants to actually do anything productive.
We have already travelled to India thrice since last year, including last week, in order to try and complete this deal
However, the monitoring committee did not speak to us or meet us, so we approached the NCLT on May 2, and we hope the decisions tomorrow will make things clearer for us.
As part of your consultations with the Monitoring committee, have you been in touch with members from the Jalan Kalrock Consortium?
We met with the Jalan Kalrock people, we met with the banks, with several people. We have a good relationship with everyone, everybody. We have no problem with anyone.
The only thing is that we don’t understand what happened in the past two months after the Supreme Court decision, and why they are not responding to us. It’s hard for us to understand it
In your experience and consultations with other international airlines, lessors, and the Aviation Working Group, how has India’s reputation as a market changed over the last two years?
I have worked in aviation for the last 20 years. In the past, I have been part of a lessor that had two aircraft with Kingfisher. When Kingfisher collapsed, many lessors reacted and weren’t happy with Indian regulations.
After that many people, many investors didn’t want to come and invest again in India. And I think that over the past several years, Indian authorities, as well as the regulations and also the court system, they have made huge progress, which motivated other players to come again and look at the Indian markets
In the past, let’s say, in the past two years or so, there were some cases, and those cases are carefully watched by international players. People still need to have the confidence that India is a good place to invest in.
How long are you willing to wait before looking at alternative routes and giving up on purchase of the three Jet Airways B-777s?
We have not set a deadline to walk away.
At the moment, we are hoping that the NCLT will direct all parties to continue with the deal and that all relevant parties will spring into action.
If we see that they aren’t acting, we will have no choice but to ask for our money back plus interest and walk away, sadly.
How productive were your meetings with the AAI and Monitoring Committee in Mumbai last week? Have they provided a timeline for the transfer of ownership of the aircraft?
First of all, I haven’t had any formal meetings with the Airport Authority of India. We met with AAI and Mumbai International Airport Ltd because we were informed of two liens on our aircraft located in Mumbai, and this is a significant amount.
The liens were imposed because the monitoring committee is not paying the airport parking and handling fees.
We approached MIAL and AAI to settle issues related to the liens of the aircraft so that it does not become another issue that gets dragged into court, preventing us from taking possession of the aircraft.
We have already submitted $5.6 million in an escrow account, $4.6 million (10% of the total deal size) for the three planes in Mumbai, and $1 million as part of the bid process for two such planes stationed in Delhi.
And this money has been stuck in the escrow account for the last 19 months.
(An aircraft lien is a legal right to possession. In this case it is meant to ensure that mechanics, fuel providers, and repair facilities are compensated for services performed on an aircraft.
Legally, a person or agency that stores, fuels, repairs, or performs maintenance work on an aircraft has a lien on the aircraft for: the amount due under a contract for the storage, fuel, repairs, or maintenance work; if no amount is specified by contract, the reasonable and usual compensation for the storage, fuel, repairs, or maintenance work.)
Have you been able to inspect the aircraft since last year? What have your latest inspections shown?
So, we had some further inspections, but inspecting an aircraft that is on the ground for many years takes a lot of time, and many things needed to be inspected. And we haven’t received the relevant information yet.
And of course, in the last two years, the aircraft have deteriorated quite significantly.
You had also stated that you were keen to buy Jet Airways’ other B-777s as well. Is there any clarity from the monitoring committee on the auction of those planes?
Depending on how quickly we get possession of the three planes located in Mumbai, we will take a call on whether to bid for the planes in Delhi.
Last year you told Moneycontrol that you plan to convert Jet Airways’ planes to freighters starting 2025. Given that we are nearly in the middle of 2024 and you still have not been given ownership of the aircraft, how have your plans been delayed?
If we can close the deal and take possession of the aircraft in a few months, we will still be able to meet our timeline of 2025.
If that is not the case, we’ll have to see what we are doing. But we obviously won’t be able to continue like that. And if they continue to act like this, we will have no choice but to take our money back and say goodbye.
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