A consortium of lenders led by State Bank of India has decided to take Jet Airways to bankruptcy court after efforts to find a buyer to the airline, which had suspended operations since April, failed. The decision was taken after a meeting of the lenders was held on Monday after the planned sale of the airline saw few entities showing firm interest.
Jet Airways was the country’s second largest airline until last year. However, the airline’s fortunes nosedived as losses mounted due to rising operating costs, which in turn led to the airline failing to make timely payments to its lessors or pay salaries to its employees. The airline owed around Rs 8,500 crore to banks, apart from the lease and other payments it had failed to make to lessors and other operational creditors.
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After it failed to get emergency funding from lenders to run day-to-day operations, the airline suspended operations on April 17.
A month earlier, in March, its founder chairman Naresh Goyal had been nudged to step down from the board as a part of banks-led resolution plan, which would have given them control of the airline. The lenders had also agreed to pump in Rs 1,500 crore into the airline as emergency funding to keep the airline going. However, only a fraction of the payment was made; the lenders in turn focusing on finding a new investor, who would pump in money in to the airline.
But, those plans unraveled as the sale didn’t generate much interest. Abu Dhabi-based Etihad, which held 24 per cent in the airline, was the only bidder who was committed to pump in money, but only for a minority stake. It had also sought exemption from the regulatory requirement to make an open offer. Furthermore, it had made it clear that majority of the funds that the grounded Jet Airways needed to revive would have to come from elsewhere. In recent weeks, the Hinduja Group and AdiGro Aviation, part of the London-based AdiGroup, had evinced interest in investing in the airline. However, with no operational partner who could help revive and run Jet Airways in sight, the lenders were perhaps left with little option but to approach the National Company Law Tribunal and initiate insolvency proceedings.
“A meeting of lenders was held to consider the way forward in respect of Jet Airways. After due deliberations, lenders have decided to seek resolution under IBC (Insolvency and Bankruptcy Code) since only a conditional bid was received and requirement of the investor for SEBI exemptions and resolution of all creditors is possible under IBC,” the SBI-led consortium said in a statement.
“Lenders led by the SBI have been taking efforts to find a resolution for Jet Airways outside IBC, but in view of the above, lenders have decided to seek a resolution within the IBC process,” the statement further added.
Jet Airways, for long, was applauded for the service it offered in-flight. Ideally, there would have been many suitors. The Tata Group had held preliminary talks to invest in the airline. Some reports last year had also suggested that Air Canada and US-based Delta Air Lines were also among potential suitors.
However, over the last few months, several of its grounded Boeing 737 aircraft were de-registered by the Directorate General of Civil Aviation at the request of lessors, so that they could be leased to other airlines around the world. SpiceJet, which also operates a largely Boeing fleet, has leased some of them. The airline also hired many Jet Airways employees. Many of Jet’s slots in prime airports like Mumbai and Delhi were also allotted to other airlines. All these reasons may have prompted many potential investors to stay away.
Last month, Vinay Dube, the CEO of Jet Airways apart from other top executives had resigned. Last week, stock exchanges imposed trading restrictions on the airline effective June 28.
Two operational creditors had already filed insolvency pleas in the NCLT last week to recover their dues. The lenders, too, will now initiate insolvency proceedings to recover their debts.
Jet Airways shares ended near 17 per cent lower on Monday to close at Rs 68.30 on the BSE. The stock has crashed more than 70 per cent since the airline grounded operations on April 17.
