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Jet Airways : The Insolvency Saga

Introduction:

Jet Airways, the full-service operational carrier in India has been suffering nuisance for past few periods. Jet Airways achieved success for many years as it was started in 1993 by Naresh Goyal with four leased Boeing 737 aircraft. While the major factors like intense pricing competition, weak rupee and rising fuel costs have affected Indian airlines like IndiGo and SpiceJet Ltd very badly, Jet Airways is in a league of its own. A consortium of 26 lenders, led by State Bank of India admitted Jet Airways to the bankruptcy court to recover their dues of over Rs 8,500 crore, after having failed to sell the airline as a going concern. Apart from banks , the airline alos owes over Rs 10,000 crore to its vendors, including the aircraft lessors and over Rs 3,000 crore to its employees, who have not been paid since March. The airline has been having negative net worth for long and has run a loss of over Rs 13,000 crore in the past few years. Late last month, the resolution professional Ashish Chhawchharia had floated Expression of Interests (EoIs) for selling stake in the airline that stopped flying mid-April.

The journey so far:

Year - 2018

May 3, 2018 : Jet Airways shares fall 12.3% after InterGlobe Aviation narrated a recession in net profit for March - quarter  a day earlier.
May 23 : Posts first quarterly loss in at least 12 quarters, says it has a negative net worth that "may create uncertainable".
Aug 1 : Media Reports suggested the Jet has asked employees to take an up to 25% cut in salaries as a part of a cost cutting measure.
Aug 3 : Jet denies report that it cannot fly beyond 60 days, and terminate conjecture of stake sale.
Aug 9 : Jet Airways delayed board meetings for first-quarter results after State Bank of India (SBI) chairman says the airline's loan is on the bank's watch list but Jet says it is regular in payment obligations to all banks.
Aug 13 : Airline contended that it is considering various options to meets its account requirements.
Aug 15 : Hearsay that the US private equity firm Blackstone Group LP is in talks to purchase a stake in Jet's frequent-flier loyalty programme Jet privilege.
Aug 20 : The private equity firm i.e, TPG Capital is seeing investing in Jet, but is not close to finishing a deal.
Aug 27 : Jet registered a loss for the June-quarter, says it will insert funds and cut expenses by more than 20 billion rupees in two years.
Sept 4 : Government designed consolation package for airlines.
Sept 6 : Jet said it has paid salaries to 84% of its employees after rumors emerge that pilots cautioned 'non-cooperation' over salary default.
Sept 20 : Income Tax Department administer survey at Jet's premises.
Oct 4 : Rating agency i.e, ICRA downgrades the company's long term loans and Non- Convertible Debentures, mentioned impact of straight increase in jet fuel prices, rupee depreciation, delay in implementation of liquidity initiatives.
Oct 18 : Indian conglomerate Tata Group was in talks to buy stake in  airline but Jet yelled at such rumors as hypothetical.
Oct 19 : Jet Airways responded shortening of daily operation as 13 planes were stranded.
Oct 30 : US- based Delta Air Lines Inc. expressed interest to buy Jet stake from promoter Naresh Goyal and Etihad Airways.
Nov 5 : Rumors were that the Tata aims to purchase the 51% stake in the airline owned by Naresh Goyal, and Etihad Airways' 24%, and merge Jet with Vistara.
Nov 12 : Jet posted third straight quarterly loss but still chief executive officer Vinay Dube expresses confidence in overcoming current challenges.
Nov 13 : Tata Sons started due diligence to buy Jet but Jet's executive says company is in negotiations with multiple parties for a stake sale in its loyalty program, and equity infusion airline in the airline.
Nov 15 : Shares surge nearly 25% following reports that the defunct airline was nearing a rescue deal with Tata Sons while another report says the Indian government asked Tata to explore buying Jet.
Nov 16 : Tata Sons says discussions on Jet has just started and no proposal has been made yet.
Nov 20 : But Tata Sons gradually moved slowly as some of the directors have expressed dissenting opinion on Jet deal.
Nov 21 : The defunct airline said that the buzz on Naresh Goyal, Etihad discussing merger of JetPrivilege is hypothetical.
Nov 22 : Independent director of Jet Ranjan Mathai resigned, citing rising pressure from other commitments.
Nov 26 : Naresh Goyal might have considered giving Jet Airways operations to Etihad Airways.
Nov 27 : As the Pilots are not convinced even if the Airline promised to clear all its dues by March 2019.
Dec 1
: Robin Kamark, responsible for Etihad Aviation Group's minority equity investment strategy, joins the Jet Board. He replaced Harish Mohan in a move that market experts said could indicate the possibility of a fresh equity infusion by Etihad into the cash- strapped airline.
Dec 2 : Jet declared the withdrawal of flight services from seven Gulf countries.
Dec 3 : Jet annulled flights due to pilots strike over non-payment of salaries.
Dec 8 : ICRA degenerates Jet Airways ratings.
Dec 14 : SBI asked EY to carry out forensic audit of Jet Air accounts from 2014-18.
Dec 21 : Board agrees on additional fund raising during the board meeting.
Dec 31 : Jet Airways neglected on debt repayments for the first time.

Year - 2019

Jan 8, 2019 : The Stakeholders asked the company to deliver on certain milestones based on which further action will be taken.
Jan 17 : SBI announced that the lenders were considering a resolution plan for Jet Airways to ensure long-term viability of the debt- burdened company. As the Chairman Naresh Goyal said he is ready to invest Rs 700 crore in the company if he is allowed to retain at least 25% stake in the airline.
Jan 29 : The defunct Airline grounded three more planes on lease rental default.
Feb 3 : It has changed its ticket distribution scheme as part of cost-cutting plan. It has also ended partnership with one of the largest global air ticket reservation data provider and Global Distribution System (GDS) company, Amadeus.
Feb 7 : Mops Rs 250 crore from advanced sale of tickets to its customer loyalty programme Jet Privilege, less than five months after raising money through the same route. Pilots also refuses to take up any on-ground duty following the management 'forcing' some pilots to either perform office duties or go on leave. The National Aviation Guild (NAG), the union body representing Jet Airways pilots, has issued a directive to its members to not accept office duties.
Feb 8 : Jet grounded four more aircrafts due to non-payment of dues.
Feb 21 : An Extra Ordinary General Meeting cleared a banks-led resolution plan, including the fresh allotment of shares to lenders.
Feb 14 : Jet suffered a net loss of Rs 587.77 crore for Q3. Board approves a bank-led provisional resolution plan. Under this plan, the SBI-led lenders will convert the debt into 11.4 crore shares for just Re 1. With that, the lenders will become the largest shareholders in the company, with a stake of about 50%.
Feb 28 : Till now, Jet Airways was forced to ground 50 more of its aircraft.
Mar 25 : The founder Mr. Naresh Goyal and wife Anita resigned from the board of the airline.
Apr 8 : Lenders were called for expression of interest (EoI). In a twist Goyal also puts forward an EoI. Others including Etihad Airways, TPG Capital, Indigo Partners and NIIF also joined the fray.
Apr 15 : The Jets' CEO Vinay Dube writes to banks for emergency funding of Rs 1,000 crore but lenders don't surrendered..
Apr 16 : Mr. Goyal quits the race, but lenders refuse to give interim funds.
Apr 17 : Jet Airways announced the temporary shutdown of its operations after lenders turn down a request for funds.
Jun 20 : Due to its huge debt obligations, Jet Airways was admitted to the National company Law Tribunal.
Jul 5 : The Mumbai bench of the National Company Law Tribunal (NCLT) have taken cognizance of this matter and has appointed Mr. Ashish Chhawchharia of Grant Thornton India, as Insolvency Resolution Professional (IRP) for Jet Airways.
Jul 12 : National Company Law Appellate Tribunal (NCLAT)  stayed an order of NCLT and agreed to hear a plea filed by the Dutch court seeking access to the financial details of Jet Airways.
Jul 23 : NCLT directed the resolution professional to discuss the grounded airline's salary payment issues with its Committee of Creditors (CoC).
Jul 24 : Ashish Chhawchharia has asked the Ministry of Civil Aviation to extend the right over slots till March, 2020. But in order to control the rising air fares, the government has allocated slots to other competing airlines till September 30, 2019.
Aug 6 : The CoC of Jet Airways approved all resolutions on its agenda including the evaluation criteria for potential bidders of the grounded airline as the RP informed the stock exchanges that all resolutions were passed with the required majority.
Aug 12 : In a big blow to Jet Airways' revival hopes, mining and metal baron Anil Agarwal's family trust Volcan Investments (VI) has withdrawn its expression of interest (EOI) for the grounded airline. VI was among three international entities who had submitted their EOI for Jet and now two little known players i.e, Avantulo Group and RA Creator are left in the fray.
Aug 13 : The apex consumer commission has directed Jet Aiways to pay a compensation of Rs 1 lakh along with interest to a Chhattisgarh resident for preponing a flight without informing him in June 2012 due to which he could not appear in an examination scheduled for the next day.
Aug 14 : Indian airline SpiceJet posted soaring profits for the second quarter i.e, 35% growth from operational revenue, while Jet Airways' prospects continue to plummet.
Aug 16 : In a final call to save Jet Airways, the employees of the Airline have decided to protest at Jantar Mantar, New Delhi in order that the NCLT hears the ongoing insolvency case of the airline at 11 a.m on August 10.
Aug 17 : Claims submitted by creditors against Jet Airways have shot up from Rs 24,000 crore a month ago to Rs 30,558 crore now, making hopes of any revival of the defunct airline dimmer.
Aug 20 : The Central Government extended the process of temporary allocation of slots and bilateral foreign flying rights of defunct airline, Jet Airways to other airlines till December.
Aug 21: NCLAT asked lenders of Jet Airways that whether they will cooperate with the Dutch court administrator who is pursuing insolvency proceedings against the debt-ridden carrier and asked the CoC to inform whether they are set to pay fees and bear costs incurred by the Dutch administrator.


CRITICAL ANALYSIS:

Jet Airways is on the brink of liquidation process. Since no solemn offer has been received for the airline that has run up huge liabilities and its business have been shut for over four months. However, there are still some hopes for it as the Russian treasury fund RA Creator and Panama based Avantulo Group have shown interest to revive this defunct airline. But Anil Agarwal retrieves back on August 12, just two days after submitting an EoI, have raised issues on the revival of Jet Airways. Etihad Airways and Hinduja Group also didn't show any interest due to some "unresolved issues". Also, a Jet Airways' employee consortium and AdiGro Aviation, which had expressed interest in bidding for the plan, hasn't met the deadline. The resolution professional expects submission of the final resolution plan for approval by September 21. In terms of the time-frame, the judge hearing this case had given a 90 day window to the CoC to find a buyer for the airline. This was in June and the time period gets over in the next few days. The creditors are expected to meet shortly and as on date it appears the only option in front of them will be to bind the airline over for insolvency. This process is quite academic now. If nothing happens until that moment, then the airline will go for liquidation.