The saga of Jet Airways’ insolvency is turning into another exceptional case under the new Insolvency and Bankruptcy Code, 2016. The grounded airlines has been struggling to find bidders for nearly a year. On March 18, the Mumbai bench of the National Company Law Tribunal (NCLT) granted another extension of 90 days for the corporate insolvency resolution process (CIRP) as requested by the committee of creditors headed by State Bank of India (SBI).
Meanwhile the aviation sector in the country is in crisis mode after the coronavirus pandemic which has forced countries to restrict air travel and close borders. As implications emerge, the Indian government is reportedly considering a rescue package worth $1.6 billion or nearly Rs 1.19 lakh crore. The amount includes a temporary suspension of most taxes imposed on the sector.
Last year, after facing a severe liquidity crunch, Jet Airways temporarily suspended all its international and domestic operations on April 17. Subsequently, on June 20, 2019, the NCLT admitted an insolvency petition against the company which was filed by SBI on behalf of lenders.
In the last NCLT hearing, Asish Chhawchharia, counsel for Jet, argued that the lenders would realise better values for their assets only if the company is resolved under CIRP instead of going for liquidation.
So far, the lenders' claims admitted by the resolution professional amounted to Rs 15974.4 crore, including Rs 8232 crore owed to financial creditors (banks and other financial institutions). Among the financial creditors are SBI which claimed dues to the tune of Rs 1,636 crore. It was followed by Yes Bank which claimed Rs 1,084 crore while Punjab National Bank claimed Rs 956.2 crore among others.
Recently, the Enforcement Directorate summoned Naresh Goyal, founder of Jet Airways, after probing the financial irregularities at Yes Bank. The summon was about transactions between the private lender and the airlines. However, Goyal skipped the questioning citing COVID-19.
Analysts argue that delay in CIRP will lead to a heavy haircut to lenders. In Jet Airways’ case, delay in resolution has been prompted by the few aircrafts in possession and an uncertainty over slots previously possessed by the company.
As per Grand Thornton, which was appointed as professional advisor for the resolution process of the Jet Airways, the company owned three aircrafts and had nine on lease. While the company earlier operated 101 leased aircrafts, reports suggest that most of those aircrafts were repossessed. Since the company’s operations have been temporarily suspended, the prime slots previously possessed by Jet have been temporarily reallocated to other airlines. However, there is no clarity whether the new bidder will get the slots previously possessed by Jet.
The number of employees in the airline has come down from 13,318 in March 2019 to 8,845 employees in June 2019.
According to reports, three companies – Russia-based Far East Development Fund, Delhi-based Prudent ARC and South America-based Synergy Group have expressed an interest to take over the airline.
So far, the resolutional professional, Chhawchharia, has invited bids six times in three rounds. Abu Dhabi-based Etihad Airways, TPG Capital, Indigo Partners, and India’s government-owned sovereign fund National Investment and Infrastructure Fund (NIIF) had shown interest in the airlines, but reports now suggest that these entities are out of the fray.