Etihad taps Alvarez & Marsal for potential Jet Airways turnaround

29 January 2019

A team of Alvarez & Marsal turnaround specialists is presently conducting an on-the-ground due diligence examination of Jet Airways according to Reuters, brought in at the behest of Etihad which is reportedly considering increasing its stake in the beleaguered airline.

Abu Dhabi national carrier Etihad – a 24 percent Jet Airways stake-holder – has appointed management consultancy Alvarez & Marsal to carry out due diligence on the stuttering Indian airline as it considers a bail-out according to a new report from Reuters, with a team from A&M already said to be ‘camped’ at Jet Airways’ offices in Mumbai assessing the airline’s operations and financial records.

While Alvarez & Marsal has so far yet to comment on the report, Reuters has cited three unnamed sources familiar with the matter, one of who was quoted as saying, “Alvarez & Marsal are restructuring consultants. If they are there it means they are looking for stuff to cut.” As it stands, Jet Airways is some $1.14 billion in debt, with its profitability hit by increased competition, currency depreciation, and high fuel costs.

Jet Airways toward the end of last year tapped both McKinsey & Company and Boston Consulting Group in a bid to chart a path to recovery, with McKinsey said to be advising on cost-cutting measures and BCG looking at avenues to increase revenue. “Only Jet can appoint two consultants for the work of one,” quipped an unnamed consulting executive at the time. Alvarez & Marsal has itself worked with the airline in the past, for more than a year up until 2015, as well as earlier Seabury Consulting – which is now part of Accenture.Etihad taps Alvarez & Marsal for potential Jet Airways turn-around

Goldman Sachs was also brought on board by Jet Airways late last year to help identify and scout for potential investors for a cash injection, with Etihad meeting with Jet officials earlier this month to discuss a bail-out. Unfortunately for the airline’s founder and chairman Naresh Goyal, the potential rescue may not be enough to save his skin, with Etihad reportedly wanting Goyal to give up control as a condition of its potentially increased holdings.

Currently at a 24 percent stake, Etihad – which also holds shares in Virgin Australia, Air Serbia and Air Seychelles – can increase its holdings in Jet Airways to 49 percent according to India’s foreign ownership regulations, while it will face strict capital market rules should it climb above its current stake. Jet Airways, meanwhile, is said to control one sixth of India’s burgeoning aviation market, which is on track to become the world’s third largest within just five years.

Driven by ever-lower passenger fares, the increased competition both locally and regionally has however put greater pressure on numerous Asian airlines to cut costs, restructure and innovate – a lucrative development for the world’s tech and management consultancies. Locally, Ernst & Young was appointed by the Indian government on an Air India divestment, while further afield Hong Kong’s Cathay Pacific brought in McKinsey to guide its transformation.

Aviation MRO aftermarket faces specific challenges in Middle East

13 February 2019

Aviation sector executives have gathered in Dubai to discuss the local MRO market, with a number of challenges specific to the Middle East region.    

Organised by industry publisher and event producer Aviation Week Network, the MRO Middle East conference has wrapped up for 2019. Prior to the event, senior members of Roland Berger’s Aerospace & Defense practice spoke to on some of the aviation maintenance and repair issues specific to the Middle East market, such as the hot and sandy local environment.

Held at the Dubai World Trade Centre from the 10th to the 12th, the 2019 MRO Middle East conference and exhibition brought together more than 150 senior professionals from the aviation aftermarket for discussions around topics such as innovation in MRO (maintenance, repair and overhaul), optimisation and cost reduction strategies, and big data, prognostics and predictive maintenance.

Among the speakers for the event were Robbie Bourke, Vice President of Oliver Wyman aviation subsidiary CAVOK, providing a regional industry overview and forecast, and Roland Berger partner Richard Paton, who moderated a panel on the local threats, trends and aftermarket growth opportunities in the Middle East – featuring among others senior leaders from Etihad Airways Engineering and Jordan Aviation Airlines.Challenges remain in Middle East aircraft maintenance segmentPrior to the conference, Paton – who was recruited as a partner last year to Roland Berger's Bahrain office – spoke to Aviation Week Network-affiliated industry media site on the local market challenges, alongside UK-based Roland Berger managing partner Robert Thompson. One of the most challenging issues: the hot and sandy Middle Eastern environment.

Naturally, such conditions are not ideal for aircraft, and especially their engines. But delving deeper, Thompson further note the rapidly expanding fleets in the region – with recent departure growth estimated at around 6.5 percent – but an ageing profile, as the moderation of oil prices and economic slowdown have delayed retirements of older aircraft and curbed the number of new deliveries.

Yet local MRO operators – serving an industry which is forecast to grow by 4 percent globally over the next decade to $115 billion – are lacking price competitiveness due primarily lack of home-grown workforce and thus higher labour costs, with international outsourcing the result. Still; “For engine and component services, where labor is a smaller portion of total costs, Middle East providers can be competitive,” says Thompson.

Particularly, he adds, if they develop their capabilities by investing in facilities such as test beds for engines. Here, there has already been some movement, with new MRO facilities in the UAE and in Jeddah – the latter said to the largest in the world – to provide a more competitive landscape. But, more investment will be needed, concludes Paton, to ensure a stream of qualified local mechanics.