TPG’s bid for Jet Airways stemmed from the conviction that it can turn around the cash-strapped carrier, backed by the experience of resurrecting Continental Airlines, and its investments in airline companies.
The San Franciso-headquartered private investment firm is one of the qualified bidders for the temporarily grounded Jet Airways. The others are Etihad Airways, Indigo Partners and the National Investment and Infrastructure Fund (NIIF).
In 1993, TPG made a major investment in the then bankrupt Continental Airlines, a decision that many in the industry thought was “suicidal”. However, it revamped the carrier and earned its stripes as one of the pioneers of the private equity boom. Since then, the firm has invested in a number of airlines, some of which were struggling to fly.
“TPG has the experience of turning around aviation firms, and it wants to bring that experience here as well. Jet Airways has the problem of debt and certain operational issues, but the carrier’s loyalty programme (Jet Privilege), parking slots, and flying rights are of great value for an investor, who is looking at reviving the carrier,” Dhiraj Mathur, an industry expert and former partner with PwC, told BusinessLine .
The private investment firm’s interest in aviation includes Brazilian air carrier Azul, started by Brazilian-American airline entrepreneur David Neeleman, who had founded four commercial airlines including JetBlue.
“TPG generally invests along with others where the strategic investor runs the show and it exits the business 3-5 years later. If Etihad gets rest of two (NIIF and TPG) on board to bid together, then it will have an indirect 49 per cent holding, and whatever the others want in, taking the stake to a total of 71 per cent,” Sameer Karla, Founder, Target Investing.
TPG, which invests in diverse industries across consumer and retail, media and telecommunications, and travel and healthcare, among others, also manages investment funds with a focus on growth capital, venture capital, public equity and debt investments.
“It will get a valuable distressed asset by putting in equity at a throwaway price. The company would have thought that the banks will take a haircut, and it will bring in a few experts to turnaround the airline,” said a banking industry executive.
The deadline for submitting bids for Jet Airways by the four qualified bidders is May 10.
TPG declined to comment for this story.