Due to mounting debt, rising operating costs, and fierce competition from low-cost carriers, Jet Airways—once the leading airline in India—had severe financial problems in the late 2010s.
By 2019, Jet Airways was struggling financially and failing to pay its employees and suppliers, which led to issues and damaged the company's reputation.
In April 2019, Jet Airways ceased operations because their debt had risen to above Rs 7,500 crore. Lenders, supported by the State Bank of India, quickly dragged the airline before the National Company Law Tribunal (NCLT) for insolvency proceedings in an effort to recover debts through a revival.
The revival process for the airline successfully attracted the attention of investors, notably the association of Kalrock Capital and Murari Lal Jalan, who took a decision for a recovery plan that was approved by the NCLT in 2021. However, this plan encountered significant challenges, primarily due to persistent disagreements with lenders and former employees regarding payment schedules, alongside the association's failure to meet its financial commitments in a timely manner. By 2023, Jet’s prospects for revival had sharply declined, as the Kalrock-Jalan association consistently struggled to fulfill its financial obligations. The ongoing disputes among stakeholders and the absence of effective solutions to restore the airline's operations compelled lenders to actively seek alternative pathways.
After 5 years of hardly any progress the Supreme Court of India with no choice left on Thursday ordered the liquidation of Jet Airways on the basis of insolvency and bankruptcy code (IBC) under article 142 of constitution Act.
According to the resolution plan, total cost was to pay Rs 4,783 Cr and Rs 350 Cr had to be made as first payment, the deadline given by NCLT was 20.05.2022 but despite that the deadline was subsequently extended. (Source: https://indianexpress.com/article/business/aviation/supreme-court-nclat-jet-airways-9657883/ ).
Thus resulted in the payment of CIRP costs and the dues of workmen and employees which should have been prioritized were also not paid. Similarly, airport dues have also increased several times and have gone out of control and needs to be stopped. So eventually the Supreme Court had to take action and thus decided to liquidate the company after 5 years of being grounded.
The airline has been grounded since 2019, yet retail investors have continued to trade its stock, hoping for a revival despite the clear risk of the company being delisted if it undergoes a successful insolvency resolution or liquidation. According to reports from 2023, the Jalan Kalrock resolution plan proposed reducing public shareholding from 25 percent to just 0.21 percent, which would have eliminated the market value of public shareholders. However, this did not seem to deter retail investors. (Source: https://indianexpress.com/article/business/aviation/supreme-court-nclat-jet-airways-9657883/ ).
At current the market value of Jet airways is Rs 389.69 Cr where retail shareholders are holding Rs 74.6Cr, Punjab National bank is holding Rs 100.539 Cr, Etihad Airways holding Rs 92.8056 Cr, Promoters holding- Rs 96.6725 Cr. (Source: https://www.moneycontrol.com/news/business/jet-airways-1-43-lakh-retail-shareholders-staring-at-wipeout-after-sc-orders-liquidation-12860567.html ).Around 1.43 lakh shareholders who bet on Jet Airways are going to wipe out after the decision of Supreme Court now.
Supreme Court finally decided to close the curtains on Jet Airways after a prolonged duration of 5 years of being inactive, although association Karl-Jalan took the initiative to revive the company, they failed to provide the first payment and struggled to cover financial obligation.
Retail shareholders who had hopes that the company will get revived are now going to wipe out and meet similar fate like DHFL when there shares got delisted from the market. Now NCTL will be responsible for clearing the all the dues and appoint a liquidator. In Short The Supreme Court’s authority puts an end to Jet Airways’ prolonged insolvency saga.
No Comments