On 17th April 2019, Jet Airways stopped all its operations. Reason: Not enough money to even fuel. Once Jet Airways used to rule the skies, but at the time when it ceased its operations, pilots were working for them without pay for many months. There was a deadline for its bidding. More than 11 bidders were to come forward. However, at the 11th hour, it was only Etihaad that came. Even Etihad's bid came with a condition – it was not going to bail out Jet Airways completely.
The condition wasn’t met and a few days ago, Jet Airways, like many business giants under IBC, initiated the Insolvency proceedings. However, the insolvency proceedings have to be completed within 90 days, instead of 180.
Why did Jet Airways go Insolvent?
Insolvency and Bankruptcy Code is a game changer, but not always in a positive way. Its introduction came with a thunderstorm that has swept away many companies including Reliance Communication, Reid and Taylor, etc. Finally, it was Jet Airways turn. Why? How did an Airlines Company, which is 2010, became the largest Airline Service in India turned insolvent a mere 9 years later? There are many theories about this question, and the following is ours:
- Lack of competitive spirit: At the time Jet Airways was the biggest Airlines in India, it didn’t bother to have a that competitive edge. In order words, it became comfortable with its situation because it was more advanced than its competitors by a large margin. However, with the emergence of more airlines, the prices became a lot more competitive and soon, it was evident that Jet Airways won’t be able to keep up.
- Unpaid dues: Because Jet started to lose its competitive edge, it started to take more loans to make up for the losses. However, it soon became evident that the loans weren’t merely to make up for the losses, it was to stay afloat. As a result, by March 2019, Jet owed Rs 8,414 Crores to the banks.
- Delayed Salaries: Pilots’ salaries were delayed over and over. There were more than 20,000 workers that were associated with Jet Airways working without pay for several months. These employees became Jet’s operational creditors.
- Canceled flights: Financial situations got increasingly bad as Jet Airways had to cancel 300 flights in February and March. Afterward, more and more flights got grounded. It all hit the final moment when in April, it ceased all operations.
- Etihad didn’t fully commit: Etihaad had been a part of Jet Airlines since 2013. But, it didn’t have any contribution in the way Jet Airlines did business. Etihad was one of the bidders that came forward to aid the Airlines. However, no other bidder came forward. In the end, even Etihaad more or less pulled its support.
These five reasons flew Jet Airways in the storm of Insolvency as on 20th June, it went from being once the largest Airlines in India, to be the first domestic airliner to go into bankruptcy.
“As per the provisions of Insolvency and bankruptcy Code 2016, CIRP (Corporate Insolvency Resolution Process) has been initiated for Jet Airways” – Jet Airways quoted in its regulatory filing on 23rd June 2019.
Aftermath of Jet Airways Insolvency
Now that Jet Airways has been declared insolvent, according to the protocols:
- The powers of the board of Directors have been taken away and given to the Interim Insolvency Resolution professional.
- The Government has given it a 90-day deadline to resolve the insolvency, which is really surprising because big companies like Jet Airways get at least 180 days. When the Bench was asked about this halved time, they said that the matter is of national importance.
The second point is not based on the protocol, but it does say a lot about the flexibility of the code on how the bench can use it.
There is a lot more to happen in this interesting Insolvency case that is supposed to be resolved in half the time.