case study jet airways

Jet Airways Case Study: Reasons for Shutdown & its Upcoming Revival

Lakshya Singh , Anik Banerjee

The Jet Airways case study is now so popular that it is mentioned in almost every Business School's curriculum due to the airline's unimaginable debacle. Founder Naresh Goyal has been investigated by the Enforcement Directorate (ED) and a large number of ex-employees have remained jobless after the airline shut down its operations in April 2019. April 2020 reports revealed that around 4000 employees were still on the rolls of Jet Airways, and these employees were facing tough times in the absence of any regular source of income.

Jet Airways' shutdown is often considered one of the biggest organizational failures to have occurred in India. A lesson for many, this post covers the journey of Jet Airways and digs deep into the reasons for its failure. However, if you are wondering "is Jet Airways coming back?" then you would be glad to know that it is indeed, as far as the recent May 2022 reports reveal.

After its collapse, Jet Airways declared bankruptcy, and on 17 April 2019, it decided to shut down operations temporarily. Some of its assets have gone to other airlines while a few aircraft remain parked till the bankruptcy proceedings are completed. However, with the recent advancements that proved positive for the airline company, the popular airline service provider may see a revival in 2022 itself.

In this Jet Airways case study, we will delve into the Jet Airways insolvency case, which will cover the Jet Airways introduction, its history of Jet Airways, its downfall of Jet Airways, and the resuming of its operations that is due. So, let's get started!

Indian Aviation Industry Jet Airways History The Consequences of the Downfall of Jet Airways Similar Cases In Aviation Industry The Common Link In All Of These Cases Reasons Behind Jet Airways Bankruptcy Buying Proposals Jet Airways, All Set for the Revival In 2022 The Future Plans of Jet Airways

Indian Aviation Industry

Aviation is an under-saturated sector in India. As more and more Indians choose flight as the best means of travel, the availability of aircraft is yet to catch up with this growing trend. For the numbers, India has 565 commercial aircraft for a population of 1.3 billion.

The United States, on the other hand, has 7,309 commercial aircraft for a population of 328 million. To add to the aviation industry's woes, the majority of Indian airports are not up to the mark in terms of infrastructure. For instance, most of the airports in India have only a single operational runway, whereas countries like the US have no less than 5 runways.

Jet Airways History

Naresh Goyal started Jet Airways with 4 leased Boeing 737 aircraft in 1993. The airline was the paragon of success for domestic carriers in India. There were rumblings of trouble brewing within Jet Airways in August of 2018 when the company deferred the second quarter results of that year.

The government watchdogs got a sniff of discrepancies in the airline's financials. In the same month, the DGCA (Directorate General of Civil Aviation) conducted a financial audit of Jet Airways. It was based on the reasoning that the deferment of employees’ salaries ought to affect their morale and attitude.

The same month, Jet Airways posted a loss of INR 1323 crores.

In September of 2018, the Income Tax department surveyed the Delhi and Mumbai offices of Jet Airways. The company was then alleged of financial misappropriation. Naresh Goyal, who was then the Founder-Chairman of Jet Airways, also came under the radar of the government and its law enforcement agencies. He and his wife, Anita Goyal stepped down from the Jet Airways' operations on March 25th, 2019, after the financial crisis that the airline company was in, came in front of everyone.

Jet Airways founder Naresh Goyal and his wife Anita, were stopped from leaving India by immigration authorities at Mumbai airport. They were offloaded from a Dubai-bound Emirates flight, which was called back after it had reached the taxiway at Mumbai airport on May 25, 2019, since then, he was stopped from flying out of India.

There were charges of money laundering and foreign exchange violation against Naresh, and this led the Enforcement Directorate to question him in September 2019. He was detained and questioned again by the ED in 2020. As far as the recent reports dated April 22, 2022 go, the Central Bureau of Investigation (CBI) would likely file a First Information Report (FIR) against Naresh Goyal for defrauding banks and misappropriating the bank-sanctioned loans. The banks and their officials who granted him the loan, also came under the scanner this way.

The Consequences of the Downfall of Jet Airways

Jet Airways shut down its operations temporarily on 17 April 2019. The last flight was from Amritsar to Mumbai . The shutting down of the company affected 20,000 employees and more than 60,000 people indirectly. The company is reportedly in a debt of a billion dollars. NAG (National Aviator’s Guild) appealed to the PMO (Prime Minister’s office) and then-Civil Aviation Minister Suresh Prabhu to help the company and its employees.

The government on the other hand reportedly asked the banks to save the company without pushing it to bankruptcy. With unemployment being a major electoral issue for the government, an addition of 20000 to the list of jobless Indians will only give more substance to the opposition. The Government is therefore pulling out all the stops to prevent Jet Airway's insolvency.

Consequences have been of such an unprecedented level that an employee of Jet Airways committed suicide in Mumbai. Shailesh Singh was a cancer patient and was on a break from his job as a senior technician at Jet Airways. He jumped from his building due to depression on 27 April 2019.

Similar Cases

It is not the first time that an airline company has fallen from grace. Many companies before Jet Airways have seen a similar fate. Some of them are:

• Kingfisher Airlines
• Air Deccan    
• Air India Cargo
• Indian Airlines
• Sahara Airlines

The Common Link In All Of These Cases

The common link in all of the above examples is that they all were, at some point, involved in a merger.

Kingfisher Airlines bought Air Deccan . Kingfisher was a full-service airline, whereas Air Deccan was a low-cost airline. When Kingfisher bought Air Deccan, it incorporated some changes in Air Deccan’s fleet and we all know what happened after that. Both the companies faced a downfall.

Before Air India and Indian Airlines merged, both of them were doing reasonably well. After coming together, the crown jewels of Indian airspace remain in the red. Air India has a debt north of INR 50,000 crores and nothing positive has come out of the government's efforts to revive the national carrier.

Jet Airways merged with Sahara Airlines and Jet rebranded Sahara as “Jet Lite”. Sahara Airlines is now lost in oblivion and Jet Airways is heading on the same path.

Therefore, it won't be wrong to say that mergers and acquisitions in the case of airlines are a risky bet. A successful airline establishes a unique identity of its own, and meddling with its brand and presence usually ends on a negative note.

Reasons Behind Jet Airways Bankruptcy

There are many reasons behind the failure of Jet Airways :

The merger between Sahara Airlines and Jet Airways was a mistake on Jet Airways' part. Sahara was acquired by Jet Airways for $500 million which was way above what the airline was actually worth.

Rebranding Sahara Airlines

Jet Airways renamed Sahara Airways as JetLite. Sahara at the time was a powerhouse with its name on every Indian's tongue. The rebranding cost Jet Airways a major chunk of its customers; flyers who were attracted towards the Sahara brand image couldn't resonate with JetLite.

Mismanagement

Every company and organization rests on the abilities of its management board; there are no second opinions to this school of thought. Naresh Goyal , the founder of Jet Airways, decided to become a one-man army for Jet Airways and did not hire a sound management committee to assist him in running the airline. Insiders often talk about his poor financial acumen. He relied on a single management team for handling all the operations related to Jet. Understanding that specialized teams are needed to run different departments is no rocket science. And when you acquire one more airline, you can't rely on your existing management board that's already burdened to take up additional responsibilities!

Full-Service Airline

Full-service airlines offer passengers the choices of economy, business class, premium economy, and first class on their flights. The company was operating as a full-service airline. Operating as a full-service airline in India is not an easy task. One needs formidable financial support and customer relationships. Catering to the wealthy, the middle class, and the lower sections of the Indian society requires strategy and operational excellence beyond imagination. That is why most of the companies focus on the middle-class segment and keep the prices as low as possible. Jet Airways was biting off more than it could chew.

Drowning in Debt

Jet Airways was never good with money. It kept on incurring debt and spending more than its revenue. The employees were paid lavishly when compared to the industry standards. For the sake of providing comfort and luxury, the Naresh Goyal-backed airline compromised with finances.

Buying Proposals

Jason Unsworth, a British Entrepreneur, and CEO of Atmosphere Intercontinental Airline, expressed his interest in buying a controlling stake in Jet Airways.

However, Jason was told by Jet Airways to sit down with SBI Caps Limited, which was leading the resolution plan for the carrier.

Jason claims to have written to Jet Airways’ lenders but never receiving any reply in return. He later wrote to Jet Airways’ CEO, Vinay Dube, about the proposal to purchase a stake in the airline. Jason said he was provided with contacts of SBI to get in touch with. He is also in talks with other Indian entrepreneurs and investors for financing his bid for a controlling stake in Jet Airways.

The winner of the Jet Airways bid was the Kalrock and Jalan consortium, which has proposed a total cash infusion of INR 1375 crore, which includes INR 475 crore that will go to meet the stakeholders' payments and of the other financial creditors.

Jet Airways, All Set for the Revival In 2022

If everything goes as per the resolution plan and the consortium receives the NCLT and Regulatory approvals, then Jet Airways will start its operations by the summer of 2021 , mentioned an official statement released by Jet Airways . Though 2021 wasn't the year that we saw the Jet Airways flight take off again, 2022 will not disappoint all those who were awaiting a Jet Airways comeback. The Union Home Ministry has already granted security clearance to Jet Airways, as per the news dated May 8, 2022, and the Delhi-based Indian Internation airline operator would be relaunching its commercial flight operations in the next few months. Jet Airways is now promoted by the Jalan-Kalrock consortium, which was earlier operated by Naresh Goyal, under whom it operated its last flight on April 17, 2019.

The new promoters of Jet Airways (Murari Lal Jalan and Kalrock Capital) considered starting a new airline but ultimately decided to go with the Jet brand; mainly because of its brand value and customer connections. As per the insolvency resolution plan, Jet Airways intends to operate all of its historic domestic slots in India and restart international operations.

On 18 October 2020, the lenders of Jet Airways approved the resolution plan submitted by UK-based Kalrock Capital and UAE-based entrepreneur Murari Lal Jalan to revive and operate Jet Airways.

The new management of the grounded airline has reached out to top executives in the aviation sector to run daily operations. Apart from passenger operations, the new management will focus on the cargo operations to improve the airline.

“The Consortium's vision is to regain lost ground, set new benchmarks for the airline industry with the tag of being the best corporate full-service airline operating on domestic and international routes. The Jet 2.0 hubs will remain Delhi, Mumbai, and Bengaluru like before. The revival plan proposes to support Tier 2 and Tier 3 cities by creating sub-hubs in such cities," the official statement noted.

The new management’s vision for Jet 2.0 is inclined towards increasing the cargo services to include dedicated freighter service (An underserved market Indian carrier). "Given, India’s position as a leading center for global vaccine manufacture, cargo services have never been more required," the statement added.

“Jet Airways has been a brand with a glorious history of over 25 years, and it is the vision of the consortium to put Jet Airways back in the skies at the earliest opportunity. We aim to re-energize the brand by infusing energy, warmth, and vibrancy into it while making it bigger and better," said Manoj Narender Madnani, board member of the Jalan Kalrock consortium.

Jet Airways is looking to resume its domestic flights in the first quarter of the next year, after March 2022 in the light of new promoters for the defunct airline. The shares of the airline surged by 5% on September 13, 2021, bringing in a fresh wave of hope for the airline. Jet Airways is currently headed by Murari Lal Jalan, a businessman based in the United Arab Emirates, and the London-based Kalrock Capital, the new owners of the airline company.

The Civil Aviation Ministry sent a letter to the airlines on 6th May 2022 , which informed Jet Airways about the grant of security clearance by the Union Home Ministry . Jet Airways operated with a test flight on May 5, 2022 , to prove to the aviation regulator DGCA that the aircraft and its components are up and running . Jet Airways, now, is pending to prove the Directorate General of Civil Aviation (DGCA) with other proving flights , before it gets the air operator certificate . These proving flights will have the DGCA officials and airline officials as passengers and cabin crew members on board and will be the same as commercial flights.

Jet Airways has been grounded since April 2019 , after two decades of flying successfully because it failed to gather funds enough for running its operations . This left around 20,000 people jobless . The flight operator had a partnership with Etihad Airways. Due to the lack of operating cash , the airline company initially started cancelling flights, cutting routes, grounding planes, and handing pink slips to employees. The insolvency proceedings for Jet Airways were then initiated in June 2019.

It was in 2020 that UK’s Kalrock Capital and the UAE-based entrepreneur Murari Lal Jalan came up with their plans. The Committee of Creditors of Jet Airways approved the resolution plan of the consortium in October 2020, of Kalrock and Jalan. The National Company Law Tribunal also approved the resolution plan in June 2021.

Boeing B777-300(ER), one of Jet Airways' airplanes that were seized in the Netherlands due to unpaid dues has not been sold off. Punjab National Bank, one of the lenders of Jet Airways that had approved the resolution plan earlier has eventually appealed against the same for which it has approached the National Company Law Appellate Tribunal (NCLAT), citing irregularities. However, this couldn't hold back Jet Airways, it seems.

The Future Plans of Jet Airways

Jet Airways appointed Sanjiv Kapoor as its new CEO on March 4th, 2022, which certainly means that the popular airline company that went defunct in 2019, would again be resuming its operations under the ownership of the Kalrock-Jalan consortium. It is currently going through a court-monitored restructuring and plans to return with a hybrid of premium and no-frills services. The flights of the revived Jet Airways, which will be helmed by Kalrock and Jalan, would have a two-class configuration where the business class passengers would be offered premium services including free meals, whereas the economy class of Jet Airways would be operating similar to the low-cost carriers, where the passengers would pay for their own meals.      

As reported in March of 2020, the bidders who issued Express of Interest (EoI) to buy Jet Airways did not submit any resolution plan adhering to the requirements. As confirmed, the grounded airline did not find any buyer till 9 March 2020.

By March 2020, around 20,000 claims were made on Jet Airways which amounted to around INR 37,000 crores. Of this, while workmen and employees have claimed over INR 14000 crores, creditors are claiming over INR 11,000 crores from Jet Airways.

While looking at this scenario, it did not seem like the Jet Airways saga will come to an end anytime soon. The Indian Government's role was pivotal in deciding the course this crisis ultimately takes. However, with the recent advancement, powered by the Kalrock-Jalan consortium, things seem to be looking up at last for Jet Airways.  

Jet Airways was on the verge of bankruptcy. Many entrepreneurs have come forward to employ people who lost their jobs due to the Jet Airways crisis, and many have been absorbed by competitors too, like SpiceJet. Now, with the Jet Airways' revival at nigh, there's hope for a whole lot of employees. Besides, the ex-employees of the bankrupt airline might also find some solace just by seeing the airline company raise its head up again, if not join the airline once again. Nevertheless, the successful revival of Jet Airways would certainly be no less than a historic event not only in the history of the airline industry but among the Indian companies that survived the worst of fates.

Stay tuned for more updates on the Case Study of Jet Airways!

What is Jet Airways?

Jet Airways is an Indian International airline service provider that was founded on April 1, 1992, and headquartered in Delhi NCR. It commenced its operations on May 5, 1993.

Who founded Jet Airways?

The NRI Indian businessman, Naresh Goyal founded Jet Airways, who was also the Chairman of the airline company.

Why did Jet Airways shut down?

There are numerous reasons that propelled the downfall of Jet Airways but the most prominent reason for the Jet Airways shut down is the lack of funds, and mounting debt.  

What is the Jet Airways insolvency case?

Jet Airways, which started off as an air taxi operator in 1993, was under insolvency for nearly 2 years after which it ceased its operations in April 2019, when it revealed the huge debt that it was in. The insolvency resolution plan was eventually brought up by UK-based Kalrock Capital and the UAE-based entrepreneur Murari Lal Jalan, which looked promising enough, and it is the same consortium that is finally proving promising enough for Jet Airways today.  

Is Jet Airways coming back?

Yes, the news is true, for Jet Airways is coming back indeed for operations. Jet Airways has already got the security clearance from the Union Home Ministry on May 6, 2022, after it successfully operated a test flight on 5th May, which has proven that the aircraft and all of its components are in good condition and working well to convince the aviation regulator DGCA.

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Please note you do not have access to teaching notes, fall of a titan: understanding the jet airways crisis.

Publication date: 18 August 2021

Issue publication date: 12 October 2021

Teaching notes

Theoretical basis.

The competitive environment of the Indian aviation industry is studied using Porter's five forces model. The SWOT analysis is used to examine the competitive position of Jet Airways. The role of Merger & Acquisition in the current Jet Airways crisis is also examined. Relevant texts studied are as follows: Kazmi, A. and Kazmi A. (1992). Strategic Management. McGraw-Hill Education; and Porter, M. (2008). The Five Competitive Forces That Shape Strategy. Harvard business review. 86. 78–93, 137.

Research methodology

This data for this case was extracted from secondary sources. These sources comprise newspaper articles, reports from the industry, reports of the company and the company's website. For gaining clarity over concepts, strategic management book by Azhar Kazmi and Adela Kazmi was referred. This case also uses websites such as moneycontrol.com to analyze financial health of the company. In the end, this case also uses some existing reports from the sources like World Bank and plane spotters to analyze the status of Jet Airways and also Indian aviation industry. This case has been tested in the classroom with MBA students in a class of Business Policy and Strategic management.

Case overview/synopsis

The Jet Airways, which once had the largest market share in the Indian aviation industry, has reached bankruptcy. Mr. Naresh Goyal, known for his aggressive expansion strategies, has already filed for bankruptcy. This case presents how buying aircrafts' obsession with poor choices on Mergers/Acquisitions could result in bankruptcy. The same could be substantiated from the fact that Goyal had many (197) of his fleet's latest aircraft. Goyal was also criticized for buying Sahara Airlines, which was performing poorly in the market. Spending a large portion of the budget in capital expenditure in an industry where operational cost is very high, only the cost of turbine fuel amounts to 50% of total operational expense. The high expenditure on capital budget and increasing operational cost weaken the financial position of Jet Airways. Despite earning decent revenue and having the highest market share in 2010, Jet Airways made losses in three consecutive years, i.e. from 2009 to 2011. After 2011, when the Indian aviation industry witnessed a high level of competition and growth in low-cost carriers (LCC), Jet Airways' survival was up for a toss. Despite the desperate measures of cost-cutting and attracting potential investors, Jet Airways reached the verge of bankruptcy. The current case emphasized the need to balance safe and riskier options, even for the market leaders like Jet Airways could fail due to poor strategic choices. This case presents some harsh realities on funds allocation. In 2010, where Jet Airways secure the highest market share and decent total revenue, it realized net losses. The case study also explains the need to adapt to the dynamics of the industry. After 2011, when LCC started dominating the Indian aviation industry, Jet Airways did not change its operation strategy and facing severe consequences. The case was about the poor strategic decisions taken by the founder of Jet Airways, Mr. Naresh Goyal, which adversely affected the health of the airline. The case also explores the possible strategic choices that Goyal could have taken to ensure Jet Airways' survival. Through this case, an attempt had been made to highlight the importance of various concepts that we need to understand while making a strategic decision for any organization. In the end, this case emphasized the role of strategy in managing an organization successfully.

Complexity academic level

The case study's target group should be Undergraduate and Postgraduate students of the Management discipline who study Strategic Management as a specialization or as the subject. This case can also be used in the Management Development Program for senior executives taking any vocational course or workshop on Business Strategy. The case focuses on one of the fastest emerging markets, i.e. India, and could be proven valuable for many multinationals companies. The case presents the changing competitive dynamics of the Indian aviation industry. The central theme on which the case revolves is the importance of sound strategic choices in a dynamic market or industry. After analyzing the case, the students would understand the complex nature of strategic decision-making and any poor strategic decisions ripple effect. This case could teach essential strategic management concepts like "SWOT analysis" and "PESTEL analysis." This case should be used to teach strategic management concepts only and not act as a judgment tool for any organization.

• Jet airways
• Strategic management
• Porter’s five forces model
• SWOT analysis
• Merger & acquisition
• PESTEL analysis

Acknowledgements

Disclaimer. This case is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from published sources.

Kathpal, S. and Akhtar, A. (2021), "Fall of a Titan: understanding the Jet Airways crisis", , Vol. 17 No. 4, pp. 569-587. https://doi.org/10.1108/TCJ-04-2020-0041

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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Why Did Jet Airways Fail? Will The Airline Fly Again? Crisis Explained

Why Did Jet Airways Fail? Will Jet Airways Ever Fly Again? Crisis Explained

As the deadline for the bids to buy Jet Airways looms, the $1.2 billion debt-stricken airline is likely to go down into the history books.

At one time, Jet Airways was the biggest and arguably, the best airline in India. With the rapidly expanding aviation market and more Indians choosing air travel as their primary way of reaching their destination, Jet Airways seemed like it was destined for success.

The privately owned carrier enjoyed very high highs. With over 120 aircraft flying to almost 1000 destinations, it seemed like Jet Airways had overcome the odds. Previous to this, privately owned airlines in India did not fare well. For example, Vijay Mallya’s Kingfisher Airlines went down in a very similar, but different fashion. While Jet Airways ran profitably for a number of years, Kingfisher Airlines on the other hand, never enjoyed a profitable year.

But while Jet Airways enjoyed the highs, it also stumbled to very low lows.

And today, with the window of opportunity to save Jet Airways closing, and no company putting out a serious bid for the troubled airline, it seems like this is the end.

So, the question on everyone’s mind is: Why did it fail, when it seemed like success was the only option for Jet Airways?

Let’s go down the rabbit hole and try to understand the reasons behind the bankruptcy.

Not the first time

Firstly, this is not the first time that the airline is in trouble. When the 2008 financial crisis hit, the still growing Indian Aviation market declined. Passenger numbers dropped and airlines were forced to either drop the prices, which they did at first or to raise them when fuel prices soared.

Jet Airways was not any different. The company did the same as everybody else and Indian passengers were on a price rollercoaster.

But Jet Airways had two more problems. The airline recently acquired Air Sahara, which cost a hefty sum of money.

Secondly, Low-cost carriers were starting to dominate India‘s skies. With the financial crisis impacting traveler numbers, Jet Airways did not make any decisions to soften the hit. Passengers started to prefer low-cost airlines like IndiGo because of their lower ticket prices and Jet Airways was in even more trouble. But the problem was, that Air Sahara was not a low-cost carrier. The airline ran the same business model as Jet, so essentially Jet Airways just paid a lot of money for additional aircraft, routes and parking slots.

Instead of trying to change the way the airline operates, the chairman of Jet Airways, Naresh Goyal told the world to hold his beer.

The company fired 1900 employees. Just like that. Sure, you could understand the move – the airline was in debt, it needed to reduce running costs to keep flying. However, instead of reducing operating costs, Jet Airways set themselves up for another crisis.

Employees of Jet Airways did not take the news well and went to the streets to protest the decision. After a few days of protests, Naresh Goyal caved in and re-hired the workers. Everything seemed okay for a while, at least in the Human Resource department. The airline was still losing money.

Jet Airways employee protest

But in 2009, Naresh Goyal asked the world to hold his glass once more.

No union for you

Jet Airways’ pilots formed a union called the National Aviators Guild. Two pilots from Jet Airways played a key role in the formation of the union.

That fact did not go down well within the company. Subsequently, to joining the union, the two pilots were sacked.

This time, the pilots went on strike. Instead of meeting the protests with empathy and re-hiring the pilots, Naresh Goyal expressed a lot of anger. Speaking to “The Times Of India” in 2009 , he said: “I will not hesitate to close down the airline […]. I have no disagreement with pilots. However, I cannot tolerate any breach of the basic principle of discipline.”

Subsequently, Jet Airways canceled numerous flights and left thousands of passengers stranded. 3 more pilots heard the decision that they are laid off.

And just as a reminder, the world was still amidst a financial crisis. By no means was the financial situation of Jet Airways healthy.

So, pilots going on strike just added to the difficulties. After adopting a hard stance, Jet Airways eventually caved in and talked with the pilots.

Yet finally, the airline also stopped bleeding money. While Kingfisher and Air India , the national flag carrier of India, were accumulating losses, Jet Airways met 2010 with a smile. The company‘s books were again in the green.

The airline optimized routes improved the efficiency of the company, added more routes, reduced operational costs (such as fuel) and started using their aircraft more.

One more Jet Airways subsidiary

Jet Airways used some innovative methods to save money. It looked at passenger consumption habits and basically reduced flight weight, by reducing the number of amenities carried on board. As a result, Jet Airways started to save a lot of money on fuel alone.

In addition, Jet Airways did something that shocked a lot of people. They already owned JetLite (formerly Air Sahara), which the company converted into a low-cost carrier. But in 2009, Jet Airways launched one more subsidiary and called it Jet Konnect. At the time the move baffled aviation experts, as now Jet Airways owned 2 subsidiaries that operated under the same, low-cost, model.

In the short-term, the moves seemed to work out great. Jet Airways started to gain traction and with the financial crisis fading away, the airline flourished. The group (Jet Airways and its two subsidiaries) operated more than a fifth (20%) of flights in India.

But in the long-term? The moves were not the best. Just 3 years later, in 2012, Jet Airways merged the two low-cost subsidiaries. 2 years down the line, in 2014, Jet Konnect as a brand stopped existing.

Nevertheless, more great news followed. In 2012, the Indian government allowed foreign airlines to take up a share package in Indian carriers. Etihad lined up to buy 24% of Jet Airway’s shares, a move which the two parties finally agreed to on November of 2013.

Naresh Goyal and Jet Airways were destined for a bright future.

However, Jet Airways had still one more problem that was left over from the past. Low-cost carriers.

As passenger numbers in India dropped in the early 2010s, the company decided to combat that in a rather unusual way. In 2013, the full-service carrier Jet Airways decided to enter a price war with two of its biggest domestic competitors – SpiceJet and IndiGo. For one thing, those two airlines were already offering cheap flights, as that was their business model.

In contrast, Jet Airways was not. Offering cheap flights was not a smart idea, as the airline kept the high running costs. But the company somehow thought that was a good decision.

If the financial year of 2012 – 2013 was a fairly successful one, as Jet Airways reduced the amount of money they lost and posted a net loss of ₹4.8 million, 2013 – 2014 was a disaster. The airlines’ financial situation was terrible, as it posted a loss of ₹36.7 million.

Subsequently, Jet Airways ended the Jet Konnect brand and the carrier made the commitment to only offer full-service flights domestically in 2014.

Now, I’m no economics expert, but IATA has done an analysis of the Indian domestic passenger traffic. The analysis, which IATA published in 2018, indicates that ever since after the 2010 – 2013 slump in traveler numbers, the demand for air travel had risen once again since 2014 and has been steadily growing.

However, the same analysis posted a chart, that around 5% of the Indian households were classified as middle-class.

You add the two together and the conclusion is very clear – the demand for low-cost travel at the time (and still now) is very high. Simply put, not a lot of people can afford to travel domestically or internationally on full-service carriers, as tickets are expensive.

This has allowed low-cost carriers, namely IndiGo, to capture a lot of the domestic market.

A shroud of success

The next year, Jet Airways managed to reduce its losses significantly. Everything seemed to work out fine for the privately owned airline and it looked like the carrier will dominate the Indian market yet again.

So much so, that for the first time in 6 years, the airline made an actual profit! If Jet Airways enjoyed the sunshine of success in 2016, 2017 brought out the first clouds in the sky, as profits took a slight hit.

This is where the trouble began, as IndiGo started to dominate the local market. Slowly, but surely, Jet Airways’ position as the number one airline in India eroded. As they lost the domestic battle, the international skies provided absolutely no chance for the airline. Jet Airways simply could not compete with Emirates , Singapore Airlines ( SIA1 ) ( SINGY ) or the likes.

Essentially, they put themselves in the corner. Their domestic demand crumbled and they had no chance to squeeze in between the big players in aviation.

Meanwhile, while Jet Airways operated on very thin margins, fuel prices surged massively. As time went on, the company yet again started bleeding money. Massively.

Buying out Jet Airways is a very lucrative idea for a lot of investors, including Etihad, which indicated that they want to increase their stake at the airline from 24% to 49%. (The Indian law prevents a foreign airline holding a majority in an Indian carrier.)

But there is one more problem – the chairman of the airline, Naresh Goyal. Multiple investors, as well as Etihad, have said that if Goyal does not step down, no deal will come through.

The former Jet Airways chairman, Naresh Goyal

But after stubbornly holding on for his chair, at the end of March he finally stepped down.

And this is the moment where we land today – On May 10, 2019.

The current situation of Jet Airways

As of now, we all know what the situation at the airline is.

After consistently missing payments, one by one, lessors began withdrawing their aircraft from Jet Airways’ fleet. In addition, the Indian Oil Corporation refused to serve any fuel to the airlines‘ aircraft for the same reason.

Jet Airways grounded fleet

In December 2018, the airline operated 123 aircraft. Not even a year later, the airline departed for its last flight (for now) on April 18th, 2019.

Riddled with massive debts and no emergency funds, the airline is looking for a hero to save them. Question is, is it too late?

The Indian government already allocated the airlines‘ aircraft and slots to rival airlines, which means that the airline has virtually no assets and it‘s value crumbles by the day.

However, Jet Airways‘ staff are the saving grace here, as they are committed to continuing working for the airline. The staff met an Indian politician, Devendra Fadnavis. He assured that the government of Maharashtra (a state in India) will also make a move if nobody puts out a bid.

If I were to predict the outcome of the whole ordeal, I‘d say that Jet Airways is destined to bankruptcy. The fact that the Indian government gave away the company‘s aircraft and slots, coupled with Jet Airways‘ debt of $1.2 billion, makes it a pretty unattractive package.

But whatever the 6 PM deadline will bring to the table, Jet Airways will always be engrained in India‘s history of aviation. The airline absolutely rocked the aviation market in the 90s and raised the quality of passenger experience in the country.

And while the heroic efforts of the employees are truly remarkable, this might be the end for the most successful private airline in India.

Recent developments

UPDATE: As of May 13th, only Etihad Airways have submitted a proper bid. However, the problem is that Etihad is currently suffering massive financial losses and is looking for a majority partner to help them with the take-over. The Abu Dhabi based carrier is looking to remain a minority stakeholder. Eithad Airways have had their fair share of bad luck in the investment department recently, as they had to pull out from the bankrupt Italian carrier Alitalia . Air Berlin ( AB1 ) was an unsuccessful investment as well, as the German airline ceased operations in 2017.

With these developments in mind, the future of Jet Airways has become even grimmer. Leasing companies are deregistering more and more of the Indian carrier’s aircraft and time is running out to save the troubled Jet Airways.

• Jet Airways

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12 Jet Airways from ‘Rise’ to Steep ‘Fall’

• Published: August 2022
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Jet Airways, a brainchild of visionary and excellent entrepreneur Naresh Goyal, incorporated in 1992, started taxi operations in 1993, began full operations by 1995 and got permission to fly international flights by aviation ministry to London in 2004. Naresh Goyal had vast experience in the field of aviation before entering the market. He availed the opportunity floored by the Government of India by liberalizing the Indian market and started Jet Airways and took various decisions at the correct point of time, which helped Jet Airways to lead the aviation market of India from 1997 to 2009. It was the leading airline of India, providing excellent services to its customers and making a strong, loyal customer base. It had a trained pilot and crew members to suit the needs of the concepts of the airline. Introduction of low—cost airline in the Indian airline industry, rising fuel prices and mechanism to handle its impact, understanding the norm of market and hesitation and inability to break the image of the airline as Luxury service provider made Jet Airways suffer and finally grounding its flights. The negligence of banks and regulators and their approach in the future towards debt—ridden companies would decide the future of Jet Airways.

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Simple Flying

The rise and fall of jet airways.

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Hong Kong's Legendary Kai Tak Airport: 5 Fast Facts

What happened to us-german carrier aeroamerica, ww2 douglas c-47 “that’s all, brother” returns to us after d-day european tour.

India's air travel market is a hyper-competitive environment at the best of times, even without the presence of a major global catastrophe. Last year, full-service carrier Jet Airways fell victim to this harsh environment and had to suspend its operations in the Spring of 2019. How did it go from a major Indian international airline to bankruptcy and near-collapse? Let's find out.

The rise of Jet Airways

According to the Economic Times of India, Jet Airways was incorporated on April 1st, 1992, as a private company. In 1993 it started as an Air Taxi Operator with four leased Boeing 737s and moved on to 'scheduled airline status' at the beginning of 1995.

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By the early 2000s, the airline offered over 40 destinations in India and two destinations outside India, operating over 1,900 flights weekly. The airline's fleet grew from four aircraft in 1993 to 42 aircraft comprised of 34 Boeing 737s and eight ATR 72-500s.

The airline would go on to buy 10 777s in 2005-06 just after purchasing 10 Airbus A330s to expand its long-haul international flights. In fact, Jet Airways' long-haul operations took passengers as far away as Toronto, San Francisco, London, Johannesburg, and Singapore, among many other global cities.

In 2010, Jet Airways became the country's largest carrier by passenger volume, becoming a significant international airline. The airline even flirted with joining the Star Alliance, a deal that never went through.

Shifting ownership

The airline's ownership status repeatedly shifted, going back and forth between private and public numerous times. At one point, early on in the company's history, Bahrain's Gulf Air and Kuwait Airways were stakeholders in the airline.

One of Jet Airways' more significant status-changes took place in 1997. It was at this time that the Government of India ruled that no foreign companies were allowed to own part of India's domestic airlines. Thus, Mr Naresh Goyal acquired the 20% Equity Shares from each of Gulf Air and Kuwait Airways, respectively, and became the 100% owner of Tail Winds. Tail Winds was the holding company for Jet Airways.

Jet Airways would go on to list itself on the local stock exchange to raise funds for expansion. 20% of the company was offered to investors. When the government eventually allowed foreign airlines to buy up to 49% of Indian local carriers, Jet Airways sold off 24% of their firm to Etihad in 2013.

Jet Airways' spectacular fall

By 2018 it became clear that Jet's growth was coming to a stop. With fierce competition coming from India's low-cost carriers, the airline lost much of its market share and revenues. It was eventually forced to sell its widebody fleet, including its 777s and A330s, to reduce its mountain of debt.

By 2019 it became clear that without a huge investment, the airline would collapse. However, no investment came, and on April 17th, 2019, Jet Airways suspended all operations, shortly thereafter going into bankruptcy proceedings.

These days, Jet Airways still exists as a company with assets, as it is yet to officially "shut down". It remains in bankruptcy proceedings.

The airline is waiting for an investor to come through and buy the airline. In the past year, there have been expressions of interest and every so often names get thrown around in news articles. The latest rumors suggest UK and UAE-based consortiums are eyeing the airline.

Dealing with Cross-Border Insolvencies: An Analysis of the Jet Airways saga

[ By Shivam Bhattacharya & Naman Jain ] 

The authors are students at the Gujarat National Law University. 

The recent order of the Mumbai Bench of the NCLT approving the resolution plan for the revival of Jet Airways has marked the end of one of the earliest cases of cross-border insolvency determined under the Insolvency and Bankruptcy Code, 2016 (hereinafter “Code”). The final determination by the Court has in addition to providing insights into the working of the Code, also laid bare some of its limitations for resolving cross-border insolvency disputes. In pursuance of this, the authors intend to examine the entire case in light of the recent judgment by presenting the facts, orders and judgments passed. This article will also analyze the limitations of the Code in this regard and elaborate on how adopting some of the provisions of the UNCITRAL Model Law could help in dealing with similar insolvency disputes.

The present case begins with the initiation of ‘corporate insolvency proceedings’ against Jet Airways and concludes with the final approval of the resolution plan for its revival by the NCLT. It spans three different Court orders over a period of two years.

Company Petition No. 2205 (IB)/MB/2019 in NCLT, Mumbai Bench

Three petitions were filed against Jet Airways, the Corporate Debtor in this case, for the initiation of Corporate Insolvency Resolution Process (CIRP) against it for the huge outstanding debt is owed. During the first hearing, the NCLT Bench was apprised of the fact that insolvency proceedings against Jet Airways had already begun a month prior in the District Court of Netherlands . The Bench in this regard opined that conducting concurrent proceedings in the same matter would cause delay and vitiate the proceedings in the case. The reasoning put forth was that the two sections, Section 234 and 235 in the CODE for recognizing the orders of a foreign jurisdiction, mandate the requirement of the Indian Government to have reciprocal arrangements with the foreign country. However, the Court noted that in the instant case there were no reciprocal arrangements were made with the Dutch authorities.

Furthermore, the Bench also took into consideration that the registered office of ‘Jet Airways’ and their primary assets were located in India, and therefore the NCLT had the requisite jurisdiction in the instant matter. The Bench via its order dated 20 th June 2019 set aside the proceedings of the Dutch Court and declared it as a nullity. The initiation of the corporate insolvency resolution process in India against Jet Airways was accepted by the NCLT.

Company Appeal (AT) (Insolvency) No. 707 of 2019 in NCLAT, Delhi

The order passed by the NCLT bench on the aspect of non-recognition of the Dutch proceedings was challenged before the NCLAT by the Dutch Trustee. The NCLAT considered the appeal and directed the ‘Resolution Professional’ (hereinafter “RP”), appointed on behalf of Jet Airways, to consider the feasibility of having a joint ‘corporate insolvency resolution process in coordination with the Dutch Trustee.  The RP along with the Dutch trustee reached an agreement for facilitating the resolution process through a ‘Proposed Cooperation’ model. Both the parties reached a final agreement on the proposed model and submitted it to the NCLAT for approval. The NCLAT accepted the model via its order dated 26th September. The Bench also allowed the Dutch Court Administration to attend the meetings of Jet Airways. Interlocutory Application No. 2081 of 2020 in NCLT, Mumbai Bench

An application for the final approval of the ‘Resolution Plan’ was filed before the Mumbai Bench of the NCLT. The Bench via its order dated 22 nd June 2021 accepted the ‘Resolution plan’ on a majority of the points, and gave a time period of 90 days to the consortium for taking the necessary regulatory approvals and permissions from the DGCA. The Bench ordered the formation of a Monitoring Committee for overseeing the entire process. Though the final determination by the Benchmarked the end of India’s first cross-border insolvency case settled under the Code, however, it raised some key concerns regarding the inadequacy of insolvency provisions in the Code.

Analysis and Suggestions

With transnational business increasing at a rapid pace and big corporations setting up offices in multiple jurisdictions, this decision by the NCLT assumes much significance. The final order passed has revealed several lacunae present in the Code for dealing with insolvency cases involving foreign creditors or debtors. A major point of contention was the ‘non-recognition of the proceedings which took place in the Dutch Court by the NCLT in its earlier order. The subsequent confusion and delay caused, led to the increasing chorus for including uniform provisions within the ambit of the Code, for dealing with cross-jurisdictional insolvency cases.

In pursuance of this, it can be inferred that a major drawback of the provisions within the Code for resolving cross-border disputes is that it mandates the formation of separate and individual bilateral agreements with other countries for enforcing the provisions of the Code. Such a type of arrangement would in addition to requiring a lot of time and negotiations also increase the probability of conflicting claims being made from both sides in connection with the judicial proceedings undertaken by their respective Courts.

In light of the aforementioned discussion, the authors are of the opinion that adopting the provisions of the UNCITRAL Model Law would be integral for reducing instances of conflict between the insolvency laws of two or more different jurisdictions. The Model Law provides for three essential and inherent provisions which aim at placing both the national and the foreign creditors or debtors on an equal pedestal.

Firstly, the principle  of recognition in  the Model Law provides for the recognition of the Court proceedings in a foreign jurisdiction, which ensures that no unnecessary time is lost and the dispute is resolved in an effective manner. It also allows proceedings to be conducted in a parallel and concurrent manner.  Secondly, the ‘principle of access’ allows the foreign creditors and debtors to attend the Court proceedings taking place in a different jurisdiction. In essence this principle aids in bringing a more collaborative and transparent system in a cross-border dispute, since it gives the foreign representatives the opportunity to attend and observe the Court proceedings taking place in a different jurisdiction. This in turn greatly reduces the risk of conflicts arising from the orders or judgments passed by the Court. Thirdly, the Model Law also provides for sound guidelines under Sections 29 and 30 of the Model Law for maintaining a proper mechanism for ‘coordination and cooperation  throughout the entire insolvency process. Constant cooperation in cases involving simultaneous domestic and foreign proceedings and in cases involving multiple simultaneous proceedings is covered within the ambit of these sections of the Model Law.

It is to be noted that since India is not a party to the UNCITRAL (United Nations Commission on International Trade Law) Model Law, in the instant case, the Dutch creditors found it difficult and cumbersome in recovering their claims from the insolvent airline. The authors in this regard are of the opinion that incorporating the above three key features of ‘recognition’, ‘access’ and ‘cooperation’ from the Model Law within the Code, would go a long way in assuaging the concerns of foreign creditors and ensure that more multinational corporations engage in business and partnership with their Indian counterparts. It would also ensure that the interests of both the domestic and foreign creditors and debtors are served. Moreover, the Insolvency Law Committee (ILC) also recommended in its report of 2018 the need for imbibing the provisions of the Model Law within the ambit of the Code.

In light of the aforementioned discussion, it is of utmost importance that some of the provisions of the Model Law related to insolvency laws are incorporated within the ambit of Code to deal with cases wherein the assets of a Company or Corporation are located at multiple locations. Owing to a large amount of global trade and commerce, conflicts and disputes are bound to arise. The UNCITRAL Model Law in this regard provides arguably the most comprehensive guidelines for mutually resolving such disputes benefitting both sides.

With more and more countries adopting the Model Law and the provisions of the Code dealing with insolvency laws found to be inadequate as observed in the Jet Airways saga, it is the prerogative of the Indian insolvency professionals and stakeholders to push for the adoption of the Model Code, so that a fair, equitable and efficient system for resolving insolvency proceedings is ensured.

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Jet Airways: A Case on Bankruptcy Filing

The case study discusses the rise and fall of Jet Airways (India) Limited, a major airline in India. It helps students understand the various warning signals which, if read properly, would have made it apparent that the company was financially unviable. The case also helps to evaluate the various reorganization strategies.

• To understand the financial performance of the company.
• To understand the early warning signals and risk factors that may lead to bankruptcy.
• To understand whether the company was headed toward bankruptcy by calculating Altman Z-score Model using real data.

Bankruptcy Filing; Bankruptcy; Bank-Led Provisional Resolution Plan; Non-bankruptcy resolution; Indicators of bankruptcy; Negative net worth; Altman Z-score; Financial analysis; Identifying the probability of bankruptcy; Bankruptcy risk; Profitability Analysis; Liquidity Analysis; Bankruptcy Prediction Analysis;

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Jet Airways: An Insolvency Resolution Journey

Contributor

Jet Airways, which started off as an air taxi operator in 1993 and became a scheduled carrier in 1995, has been under insolvency for two years after it shut operations in April 2019 under a heavy debt. Jet Airways is the first Indian carrier/airline to undergo insolvency proceedings under the Cross Border Insolvency Protocol along with the Insolvency and Bankruptcy Code (IBC) of India.

A Company petition was filed in the National Company Law Tribunal (NCLT), Mumbai against Jet Airways (India) Limited ("Company") u/s 30(6) read with Section 31 of the Insolvency and Bankruptcy Code (IBC), 2016 for the initiation of insolvency proceedings by State Bank of India in the capacity of it being a Financial Creditor to the Company.

An applicant name Ashish Chhawchharia was a Resolution Professional for Jet Airways (India) Ltd. An application was filed by the Resolution Professional seeking approval of the Resolution Plan submitted by Jalan Fritsch Consortium, which consists of Mr. Murari Lal Jalan (a Non-Resident Indian based in United Arab Emirates) and Mr. Florian Fritsch (Kalrock Capital Partners Ltd, Cayman [KCPL]).

The Insolvency Resolution Plan was approved by the Committee of Creditors as well as the NCLT, Mumbai via order dated 22 nd June 2021.

RESOLUTION JOURNEY:

The tribunal decision comes exactly two years after the insolvency procedures began. The Mumbai bench of the National Company Law Tribunal (NCLT) cleared the resolution plan to revive Jet Airways and directed the Jalan-Kalrock consortium to get the required approval and licences to restart the airline within 90 days.

The tribunal rejected pleas by lawyers representing the Ministry of Civil Aviation (MoCA) and the Directorate General of Civil Aviation (DGCA) against the approval. DGCA and MoCA previously stated that the consortium cannot claim historicity on slots that were held by Jet before its bankruptcy. The slots were later distributed to other airlines. Hence, the consortium's demand for historicity of airport slots was rejected. With reference to Section 14(1)(d) of the Code, the learned senior counsel appearing for the Union of India relied upon the principle enunciated by the Hon'ble Apex Court in Rajendra K. Bhutta v. Maharashtra Housing and Area Development Authority & Anr.: (2020) 13 SCC 208 and submitted that the Corporate Debtor was not in possession of the slots on the date of the insolvency commencement. It accordingly cannot claim any right to the slots.

In October 2020, the committee of creditors (CoC) approved the Jalan-Kalrock consortium's resolution plan. The consortium proposes to invest ₹600 crore in the first two years to repay creditors and acquire an 89.79% stake in the carrier. The resolution plan also proposes selling existing non-core assets such as real estates and luxury cars by the end of the first year and said it will repay to financial creditors, ₹131 crore, ₹193 crore, ₹259 crore at the end of the third, fourth and fifth years, from the airline's cash flows, respectively. The company intends to repay creditors a total of ₹1,183 crore over five years, which includes collections from asset sale proceeds and cash flows.

As a result, the new promoters will also retain the 'Jet Airways' brand and will resume operations with about 25 aircraft, with a base in New Delhi, and restart international flights soon after. Accordingly, the Articles of Association (AoA) and Memorandum of Association (MoA) shall be amended and filed with the Registrar of Companies (RoC) concerned for information and record. For the plan to be implemented effectively, the Resolution Applicant shall obtain all necessary approvals, under any law for the time being in force, within such period as may be prescribed. The Monitoring Committee shall supervise the implementation of the Resolution Plan and shall file Status Report of its implementation before this Authority from time to time, preferably every quarter.

The Hon'ble Apex Court observed that the role of the NCLT is 'no more and no less'. The NCLT matter was taken up the Coram: Janab Mohammed Ajmal, Hon'ble Member (Judicial) Shri V. Nallasenapathy, Hon'ble Member (Technical). The order pronounced I.A. No. 2081/2020 in C.P. (IB) No. 2205/MB/2019.

The Resolution Plan submitted by consortium of Mr Murari Lal Jalan and Mr Florian Fritsch annexed to the Application is hereby approved. It shall be binding on the Corporate Debtor, its employees, members, creditors, including the Central Government, any State Government, or any local authority to whom a debt in respect of the payment arising under any law for the time being in force is due, guarantors and other stakeholders involved in the Resolution Plan. Therefore, the resolution plan was so accepted and approved.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Insolvency/Bankruptcy/Re-Structuring

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Comprehensive SWOT Analysis of Jet Airways | IIDE

By Aditya Shastri

Jet Airways (India) Ltd is a Mumbai-based international airline. It was once India’s largest airline. From its main hub at Chhatrapati Shivaji International Airport and secondary hubs at Chennai International Airport, Indira Gandhi International Airport, Kempegowda International Airport, and Netaji Subhas Chandra Bose International Airport, it operated over 300 flights per day to 74 destinations worldwide.

To better understand the reasons for the company’s continuous growth, let’s look into the SWOT Analysis of Jet Airways, which is required for any company to survive and thrive in the market.

A SWOT analysis is used to assess a company’s strengths, weaknesses, opportunities, and threats. Its primary goal is to assist organizations in gaining a thorough understanding of all the factors that influence business decisions.

So, in this case study, we’ll learn about Jet Airways and the SWOT Analysis of Jet Airways. So, Let’s get started.

About Jet Airways

Jet Airways Ltd. is an Indian airline headquartered in Mumbai. It was established as a private company on April 1, 1992. It was founded by Naresh Goyal, a London-based businessman. On May 5, 1993, they began operations as an Air Taxi Operator with a fleet of four leased Boeing 737 aircraft. 

On January 14, 1995, they were granted scheduled airline status and later on it became a recognized public company on July 1, 1996. It was then reorganized as a private company on January 19, 2001, and on the 28th of December, 2004, it became a public company.

Jet Airways was India’s first private airline to operate to foreign destinations. In India’s domestic market, it has a reasonably large market share (about 20%)

Now that we’ve covered the company’s fundamentals, let’s look at Jet Airways’ S.W.O.T analysis in the section below.

SWOT Analysis of Jet Airways

A SWOT analysis is a method of determining a company’s strengths, weaknesses, opportunities, and threats.

It’s a great tool for figuring out where the company excels and where it falls short, devising countermeasures, and figuring out how the company can grow. So let’s analyze Jet Airways’ SWOT analysis in the section below.

SWOT Analysis of Jet Airways | IIDE

1. Strengths of Jet Airways

The distinct capabilities of an organization that gives it a competitive advantage in capturing more market share, attracting more customers, and maximizing profits are referred to as its strengths.

• Vertically Integrated Operations: Jet Airways provides passenger and cargo services as well as aircraft leasing. The company operates in various parts of the world and has vertically integrated all operations, allowing it to serve a diverse range of customers and thus gain a competitive advantage.
• Strong network portfolio: Jet Airways has a strong fleet base as well as a strong network. The company operates 116 aircraft with 20 international and 48 domestic destinations in India. This assists the company in increasing operational margins.
• Focus on IT and E-Commerce Innovation: Jet Airways combined its services with travel packages to provide customers with an all-inclusive experience. It has also launched a smartphone airline application to assist users. Such initiatives assist the company in improving operational performance.
• Alliance with Etihad Airways: Jet Airways has formed a strategic alliance with Etihad Airways in order to expand into new markets. The collaboration broadened the airline’s international reach.

2. Weaknesses of Jet Airways

Weaknesses are aspects of a company or brand that need to be improved. So, let’s take a look at Jet Airways’ major weaknesses:

• Limited market share: Jet Airways competes with a variety of commercial and public airlines both locally and internationally, resulting in a market share that is limited and difficult to develop.
• Negative margins are a source of concern: Despite increased revenues, Jet Airways saw negative growth in FY 2015. Year over year, the operating margin was down (-6.2%) and the net margin was down (-9.6%). Negative margins have an impact on the company’s future ambitions.
• Customer Dissatisfaction: Many customers have complained about flight delays at various airports over the years. Many people have also expressed their dissatisfaction with the airline’s poor response time to customer concerns.
• Dependency: This over-dependence on the Indian market may have a dampening influence on the company’s revenues if the economy and/or the company’s sales in India do not grow as expected. Its high reliance on the domestic market may limit its ability to contribute to the local economy’s growth. It makes the corporation more vulnerable to changes in the country’s economic and political condition.

3. Opportunities for Jet Airways

Opportunities are areas in which a firm might focus in order to improve outcomes, sales, and, eventually, profit. So, let’s see what kind of opportunities Jet Airways can pursue in order to achieve excellent results.

• Wide-reaching strategic alliances: In order to develop further over the world, Jet Airways should consider forming alliances with other international airlines, such as collaborating with Etihad Airways.
• Positive growth in the Indian aviation industry: In recent years, the Indian airline industry has experienced rapid and exponential expansion. The industry has grown its operations and increased the number of flights on practically all routes. The industry is likely to continue to grow at a similar rate, which is good for Jet Airways.
• Growing Tourism Industry: According to the World Tourism Organization (UNWTO), foreign tourist arrivals climbed by roughly 4.4 per cent in 2015. The expansion will help the company, which now operates in over 20 worldwide countries.

4. Threats of Jet Airways

Environmental variables that can inhibit a company’s growth are known as threats. Some of Jet Airways’ threats are as follows:

• Regulations drive up compliance costs: In the aviation business, a corporation must comply with a slew of legislative, transportation, and environmental regulations, all of which drive up compliance costs and, as a result, impairs operating margins.
• High Gasoline Prices: One of the concerns that the corporation has faced in recent years is the rise in fuel prices. As a result, they have had to raise ticket prices and have lost consumers to their competitor airlines. They are facing issues not just in the domestic market, but also in the international market due to international competitors.
• Intense rivalry in the aviation industry: Intense competition exists in both the domestic and international aviation industries, resulting in price competitiveness. As pricing pressures increase, operating margins are impacted, and the industry suffers as a result.

Let’s wrap up the case study in the section below now that we’ve thoroughly examined Jet Airways’ SWOT Analysis.

As time passes, Jet Airways evolves in every possible domain of the aircraft industry, provided that the challenges and threats grow in accordance with the market opportunities. As a result, it must change its operational priorities in order to meet the expectations of both the high and low end of the demanding population. 

The market division, thus dividing the aircraft industry into parts based on the mode of operation, has forced airliners like Jet Airways to do something renowned and distinct to stand out from the crowd.

The company’s SWOT analysis aided in the formulation of key recommendations, such as establishing a new vision and strategy and adhering to current performance indicators.

Please let us know what you think about this case study in the comments section below. Thank you for reading this, and if you enjoyed it, please share it with your friends and family.

Read more such insightful case studies on IIDE’s case studies page.

Aditya Shastri

Lead Trainer & Head of Learning & Development at IIDE

Leads the Learning & Development segment at IIDE. He is a Content Marketing Expert and has trained 6000+ students and working professionals on various topics of Digital Marketing. He has been a guest speaker at prominent colleges in India including IIMs...... [Read full bio]

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IA453/2020InCP(IB)2205/MB/2019

SECTION 70 CONTRACT ACT 1872

Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (the Code)

Section 5(13)(c) of the Code.

section 25(2) (a) of the Code

Section 25(1) of the Code.

Section 19(2) of the Code

Section 7 of the Code

2019. 3. Section 25(1)

Section 5(13)(c)

• State Bank of India v. Jet Airways National Company Law Tribunal Mar 18, 2021
• Subsequent References
• CaseIQ (AI Recommendations)

Application filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 seeking declaration of monthly fees payable to Applicant as part of IRP costs, permission to file claims for payment of monthly fees and direction to treat claims as IRP costs.

• Corporate Insolvency Resolution Process (CIRP) initiated against Corporate Debtor on petition under Section 7 of the Code filed by Financial Creditor.
• Corporate Debtor failed to pay monthly rent to Applicant from March 2019.
• Applicant sent notice to Corporate Debtor to cure breach and pay within 30 days, failing which leave and license agreement would be terminated and Corporate Debtor would be required to vacate office space.
• Corporate Debtor failed to respond to notice.
• Applicant submitted that Respondent is duty bound to honour service agreements and Section 5(13)(c) of the Code includes cost incurred by Respondent to keep Corporate Debtor as going concern as part of CIRP costs.
• Applicant entitled to payment of consideration in priority as provided under Section 70 of the Contract Act, 1872 read with Section 53 of the Code.
• Leave and License agreement had clause for termination in case of default by Corporate Debtor and Applicant called upon Corporate Debtor to cure breach within 30 days.
• Applicant failed to annex letter to Application.
• Resolution Professional of Jet Airways (India) Limited writing in capacity as such.
• Section 25(1) requires Resolution Professional to preserve and protect assets of Corporate Debtor, including continued business operations. Section 25(2)(a) empowers Resolution Professional to take immediate custody and control of assets.
• Company entitled to receive refundable Security Deposit post termination of leave and license agreement.
• Breach not cured by Corporate Debtor and agreement terminated within 30 days from period of notice.
• Applicant not entitled to payment of licence fee after 31st May, 2019.
• On receipt of balance security deposit, Respondent to hand over vacant possession of premises to Applicant within 7 days.
• Whether monthly fees payable to Applicant under service agreements for relevant period form part of IRP costs in terms of IBC?
• Whether Applicant can file claims with Respondent/Liquidator for payment of monthly fees for relevant period under service agreements?
• Whether Respondent/Liquidator is directed to treat any claims of Applicant relating to monthly fees for relevant period under service agreements as IRP costs?

Application allowed. Monthly fees payable to Applicant under service agreements for relevant period declared as part of IRP costs in terms of IBC. Applicant permitted to file claims with Respondent/Liquidator for payment of monthly fees for relevant period under service agreements. Respondent/Liquidator directed to treat any claims of Applicant relating to monthly fees for relevant period under service agreements as IRP costs. Ad interim/interim reliefs granted.

Section 5(13)(c) of the Code explicitly includes cost incurred by Respondent to keep Corporate Debtor as going concern as part of CIRP costs. Applicant entitled to payment of consideration in priority as provided under Section 70 of the Contract Act, 1872 read with Section 53 of the Code. Leave and License agreement had clause for termination in case of default by Corporate Debtor and breach not cured within 30 days. Resolution Professional required to preserve and protect assets of Corporate Debtor, including continued business operations. Company entitled to receive refundable Security Deposit post termination of leave and license agreement. Applicant not entitled to payment of licence fee after 31st May, 2019. On receipt of balance security deposit, Respondent to hand over vacant possession of premises to Applicant within 7 days.

• ORIGINAL PDF

State Bank of India v. Jet Airways

1. This is an Application filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (the Code) seeking the following reliefs:

a) Declare that the monthly fees payable to the Applicant under the service agreements for the relevant period shall form part of the IRP Costs in terms of the IBC;

b) Permit and allow the Applicant to file its claims with the Respondent / Liquidator for payment of the monthly fees for the relevant period under the service agreements;

c) Direct the Respondent / Liquidator to treat any claims of the Applicant relating to monthly fees for the relevant period under the service agreements as IRP Costs;

d) Ad interim / interim reliefs in terms of the above.

2. This Bench by an order dated 20/06/2019, initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor on a petition under Section 7 of the Code filed by the Financial Creditor. The Respondent herein was appointed as the Resolution Professional (RP) of the Corporate Debtor.

3. The following are the submissions of the Applicant: NCLT, MUMBAI BENCH, COURT No. - I

I. A. No. 453/MB/2020 In C.P. (IB) No. 2205/MB/2019 Page 3 of 13

a) The Applicant permitted the Corporate Debtor to use its premises at 301B, 302, 401 and 404 of Kaledonia, Sahar Road, Andheri (E), Mumbai, for office purpose on Leave and License basis pursuant to a Leave and License Agreement dated 24/02/2011 executed between the Applicant and the Corporate Debtor. Further an Amenities Agreement dated 24/02/2011 was also executed between them to use certain amenities and facilities in connection with the Corporate Debtors occupation and use of the licensed premises.

b) The Corporate Debtor failed to pay the monthly rent w.e.f. March, 2019 to the Applicant. The Applicant sent a notice dated 30th April, 2019 to the Corporate Debtor calling upon to make the payments under the service agreements, failing which the Corporate Debtor would have to vacate the licensed premises. The said notice is extracted below.

i) We write pursuant to instructions from, and on behalf of our client Mack Star Marketing Private Limited (Our Client). ii) We refer to our letter dated 28 February, 2019 (Our Letter) pursuant to which Our Client had requested that you deposit license fees in connection with the office space used by you in Kaledonia, Andheri (Kaledonia), to Our Clients account in ICICI Bank. iii) Our Client notes that despite this request being shared with you almost two months ago, you have not yet deposited such amount in the ICICI Bank Account. Our Client is hereby giving you an opportunity to cure the breach of your obligations by depositing the payments in the ICICI Bank Account within 30 days of this letter. If this is not done, Our Client will have the right to terminate the leave and license agreement and you will be required to immediately vacate all the office space (together within any common and parking area) occupied by you in Kaledonia. iv) Please note that Mr. Sumit Ranjan Saha, director of Mack Star (i.e. Our Client), is the sole authorized representative of Mack Star, authorized to negotiate, deal on behalf of, and represent Mack Star in relation to this issue. All future communications NCLT, MUMBAI BENCH, COURT No. - I

I. A. No. 453/MB/2020 In C.P. (IB) No. 2205/MB/2019 Page 4 of 13 with Our Client must be directed to [email protected] or to us at the address specified on this letterhead.

v) This letter is without prejudice to any of the rights or remedies available (or which may be available) to Our Clients, in connection with any matter discussed herein, whether now or in future, and under law, contract, equity, or otherwise, each of which are hereby expressly reserved.

c) The Corporate Debtor failed to respond to the notice. On 28/11/2019, the Applicant issued a notice to the Respondent to vacate the premises and handover the possession of the premises by 31/12/2019. The Respondent failed to reply to this notice.

d) On 05/01/2020, i.e. after the expiry of 31/12/2019 deadline, the Applicant issued another notice to the Respondent requiring him to confirm whether the licensed premises and related amenities were being used by the Respondent for the CIRP period. Relevant paras are extracted below: Dear Sir, Sub: Occupation of Office units, 301B, 302, 401 and 404 at Kaledonia, Ville Parle, Andheri Sahar Road, Andheri East, Mumbai (the licensed premises) Ref: (i) Leave and license agreement dated 24 February 2011 executed by Jet Airways (India) Limited (Jet Airways) and Mack Star Marketing Private Limited as amended and extended from time to time (the Leave and License Agreement); and

(ii) agreement dated 24 February 2011 executed by Jet Airways and Mack Star Marketing Private Limited (Mack Star) in respect of certain amenities and facilities as amended and extended from time to time (the amenities agreement) NCLT, MUMBAI BENCH, COURT No. - I

I. A. No. 453/MB/2020 In C.P. (IB) No. 2205/MB/2019 Page 5 of 13 We write on instructions from, and on behalf of our client, Mack Star, we refer to the Leave and License Agreement and Amenities Agreement (together, the Service Agreements). In this regard, we state as under:

6. Mack Stars services of providing office space and related amenities to Jet Airways for the period commencing on the Insolvency Commencement Date and terminating on the earlier of: (a) completion of CIR Process; or (b) termination of the service agreements by you (such period, the Relevant Period), contribute towards keeping Jet Airways as a going concern and any related costs incurred by Jet Airways fall squarely within the ambit of the definition of Insolvency Resolution Process costs enshrined in Section 5(13)(c) of the IBC (such costs, the IRP Costs)

7. Your conduct of continued acceptance of services under the service agreements for running an office of Jet Airways without any demur also indicates that you have accepted that the consideration for such services shall form a part of the IRP Costs.

8. In light of the foregoing, we request you, on behalf of Jet Airways, to confirm to us on or prior to 15 January 2019, that the monthly fees payable to Mack Star (along with the administrative fee prescribed for processing delayed payments) for the Relevant period shall: (a) form a part of the IRP Costs and attain priority over payments to any other creditor of Jet Airways; and (b) be paid once the proceeds under the resolution plan or under the liquidation process are distributed in terms of the IBC.

e) The Respondent did not respond to the above letter. Hence it is submitted that the license fee and amenities charges for the CIRP period should be treated as CIRP costs as contemplated under Section 5(13)(c) of the Code. Since the Respondent availed the services NCLT, MUMBAI BENCH, COURT No. - I

I. A. No. 453/MB/2020 In C.P. (IB) No. 2205/MB/2019 Page 6 of 13 without any demur and in defiance of the Applicants request to vacate the premises, the charges towards the same shall have to be treated as CIRP costs.

4. The Applicant further submits that it is the primary duty of the Respondent to preserve and protect the assets and continued business operations of the Corporate Debtor as mandated under Section 25(1) of the Code. Hence the Respondent is duty bound to honour the service agreements. More particularly when the Respondent has opted not to terminate the service agreements upon the commencement of CIRP, the service agreements continue to be in force.

5. The Applicant further submits that Section 5(13)(c) of the Code explicitly includes the cost incurred by the Respondent to keep the Corporate Debtor as a going concern as part of CIRP costs. Respondent not only continued to accept the services of the Applicant without any demur but also ignored the Applicants express request to vacate the licensed premises making it evident that the services availed during CIRP are essential for maintaining the Corporate Debtor as a going concern.

6. Despite the Applicants express request to vacate the licensed premises, the Respondent kept a part of the licensed premises under lock and key. The Respondents conduct evidences not only the unqualified acceptance of the services but also underscores the importance of the services to the Corporate Debtor during CIRP. Therefore, this cost should be included in the CIRP. By not doing so, Respondent is attempting to unjustly enrich the Corporate Debtor or its Creditors at the expense of the Applicant.

7. It is submitted that the Applicant had acted in a bona fide manner by providing services to the Respondent and therefore the Applicant ought not to be deprived of the legitimate consideration owed to it for the services. NCLT, MUMBAI BENCH, COURT No. - I

I. A. No. 453/MB/2020 In C.P. (IB) No. 2205/MB/2019 Page 7 of 13

8. It is submitted that the correspondence made by the Applicant shows that the Applicant did not intend to render pro gratis services to the Respondent after commencement of CIRP. The Applicant is entitled to payment of the consideration in priority as provided under Section 70 of the Contract Act, 1872 read with Section 53 of the Code.

9. The Respondent filed reply to the Application and pleaded as below.

a) Clause 19 of the Leave and License agreement provides as below: Events of default entitling the licensor to pre-determine the license: Notwithstanding any contained in this agreement, it is agreed that the following shall be treated as Events of Default whereby the licensor shall be entitled, though not obliged to, pre determine/terminate this agreement, at any time during the term of this agreement: [...] If the licensee defaults in and or delays payment of any amount on due dates payable under this agreement, save and except the events of default set out in sub clauses 19.3 and 19.4 above, the licensor shall for the purposes of pre-determining and terminating this agreement give a notice requiring the licensee to rectify and/or comply with the requirements of the notice within 30 (thirty) days of the receipt of such notice and in the event of licensee having failed to rectify or comply with the same within the said notice period, this agreement shall stand pre-determined / terminated without any further notice.

b) Clause 21 of the Leave and License agreement provides as below: [...] 21.3. In the event the licensor does not refund the security deposit (less deductions as set out in clause 21.2 hereinabove), the licensee shall be entitled to continue to occupy the licensed premises until receipt of the entire security deposit amount (less deductions as set out in clause 21.2 hereinabove) without payment of any further licensee fee during the period of occupation. Any such extended occupation by the licensee, shall not be treated as unauthorised or NCLT, MUMBAI BENCH, COURT No. - I

I. A. No. 453/MB/2020 In C.P. (IB) No. 2205/MB/2019 Page 8 of 13 illegal. Against receipt of such Security Deposit, the licensee shall ensure that vacant possession of the licenses premises is handed over and made available to the licensor.

10. It is submitted that on a conjoint reading of the above clauses, it would be clear that the agreements stood terminated and the Applicant was under an obligation to refund the security deposit. In case of failure to do so, the Corporate Debtor was entitled to continue the occupation of the licensed premises until the receipt of the entire security deposit without payment of any further licence fee during the period of occupation.

11. The Applicant on 30/04/2019 issued notice to the Corporate Debtor. In the notice the Applicant stated that despite being called upon to deposit the licence fee for the occupied premises in February, 2019, the Corporate Debtor failed to do so. The Applicant further called upon the Corporate Debtor to cure the breach of the agreement within 30 days thereof and invoked its right to terminate the agreement in case the breach was not cured within the period. The notice being in the nature of a notice for eviction, no further payments was to be made by the Corporate Debtor subsequent thereto. Clause 19.5 of the Leave and License Agreement provides that upon the Applicant issuing the eviction notice, and upon the Corporate Debtor failing to rectify default of non-payment within 30 days, the agreement would stand pre-determined or terminated without any further notice. The Corporate Debtor having failed to make the payment within the period the agreements stood automatically terminated on 31/05/2019. Thus no further licence fee was payable to the Applicant in terms of the clause 21 of the Agreement.

12. It is submitted that on 17/08/2019, a letter (extracted below) was sent to the Applicant by the Respondent, referring the termination of the agreement and sought refund of the security deposit furnished by the Corporate NCLT, MUMBAI BENCH, COURT No. - I

I. A. No. 453/MB/2020 In C.P. (IB) No. 2205/MB/2019 Page 9 of 13 Debtor. However, the Applicant failed to annex this letter to this Application. JET/RP/NCLT/19-20/092 17th August, 2019 Mack Star Marketing Pvt. Ltd. Dheeraj Apartment II, P.P. Dias Compound, Natwar Nagar, Road No. 1, Jogeshwari East, Mumbai 400 060 Dear Sir, Sub: Refund of Security Deposit given by Jet Airways (India) Ltd for the use of Licensed premises at Kaledonia, Village Vile Parle, Andheri Sahar Road, Andheri (East), Mumbai.

1. I am writing to you in the capacity of the Resolution Professional of Jet Airways (India) Limited hereinafter called as the Company.

2. I wish to inform you that the Company is currently undergoing Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (Code) as directed vide order dated 20 June 2019 (Order attached as Annexure A) of the Honble National Company Law Tribunal at Mumbai (NCLT). Pursuant to this order, I have been appointed as the Interim Resolution Professional of the Company and subsequently appointed as the Resolution Professional by the Committee of Creditors at the first meeting of the Committee Creditors held on 16th July 2019.

3. Section 25(1) requires the Resolution Professional to preserve and protect the assets of the Corporate Debtor, including the continued business operations of the Corporate Debtor. In order to facilitate the Resolution Professional in the preservation and protection of the assets, section 25(2) (a) of the Code empowers the Resolution Professional to take the immediate custody and control of the assets of the Corporate Debtor.

4. While taking the custody and control of the assets of the Corporate Debtor, it has come to the notice of the undersigned that the License NCLT, MUMBAI BENCH, COURT No. - I

I. A. No. 453/MB/2020 In C.P. (IB) No. 2205/MB/2019 Page 10 of 13 Agreement in respect of the premises at Kaledonia, situated at village Vile Parle Andheri Sahar Road, Andheri (East) Mumbai, had been terminated by the Company prior to the Insolvency Commencement Date (ICD) and the Security Deposit of INR 3,29,61,490 (Three Crore Twenty Nine Lakh Sixty One Thousand Four Hundred Ninety) has not been refunded to the Company.

5. The company is entitled to receive the refundable Security Deposit (without any deductions) post termination of the leave and license agreement and you are hereby requested to credit the same to the below mentioned bank account of the Company within 3 days of receipt of this notice. Bank Account Details: Bank Name: State Bank of India Account No.: 36035234455 IFSC Code: SBIN0004791

6. Failure to make the payment within 3 days from the date of this notice shall be deemed to be non-cooperation and an obstruction to the CIRP under Section 19(2) of the Code and liable to be reported to the Honble National Company Law Appellate Tribunal (NCLAT) for necessary directions, which may include fines, penalties and prosecution as well, the costs of which shall be solely borne by you.

7. Please also note that Indian law considers me as an officer of the court and any hindrance caused in the performance of my duties under the Code or in the conduct of the Insolvency Resolution Process of the Company will amount to contempt of court, which is liable to be reported to the Honble NCLT.

8. Should you have any query or clarification, you may write to me on the below mentioned address. Sincerely, Ashish Chhawchharia (IBBI/IPA-001/IP-P00294/2017-18/10538) Resolution Professional for Jet Airways (India) Limited.

13. It is submitted that several telephone calls made to the Applicant subsequently requesting refund of the security deposit failed to evoke any NCLT, MUMBAI BENCH, COURT No. - I

I. A. No. 453/MB/2020 In C.P. (IB) No. 2205/MB/2019 Page 11 of 13 response from the Applicant. The Applicant on 28/11/2019, addressed a letter seeking vacation of the premises by 31/12/2019, disregarding the consequences of its own notice.

14. It is submitted that since the agreements stood terminated on account of notice, the question of utilizing the premises of the Corporate Debtor during the CIRP does not arise.

15. The Respondent, on 29/01/2020 in response to the letter of the Applicant dated 05/01/2020 sent a letter stating that: (a) The agreement stood terminated. (b) The Applicant was to refund the security deposit which it was refusing to do despite communication on going with the Respondents team (c) The Corporate Debtor was under no obligation to continue the agreement with the Applicant (d) There were no dues for the Applicant since the termination of the agreement. All debts due prior to the Admission Order could be claimed by filing a proof of claim.

16. Upon going through the pleadings and on hearing the counsel from either side the following are the observations of this Bench. (a) The Advocates notice dated 30/04/2019 issued by the Applicant addressed to the Corporate Debtor is an eviction notice wherein it was stated that the Corporate Debtor was called upon to deposit the licence fee for the premises and if the Corporate Debtor failed to do so within 30 days, the Applicant had the right to terminate the Leave and License Agreement and the Respondent was required to immediately vacate the premises. Even though it is stated that the Applicant has the right to terminate the agreement, by operation of Clause 19 of the agreement, on the expiry of 30 days from 30/04/2019, i.e. 31/05/2019 (admitted by both sides, it should however be 30/05/2019), the agreement NCLT, MUMBAI BENCH, COURT No. - I

I. A. No. 453/MB/2020 In C.P. (IB) No. 2205/MB/2019 Page 12 of 13 stood terminated. The Applicant required the Corporate Debtor to cure the breach of agreement within 30 days and invoked right to terminate the agreement in case the breach was not cured within that period. Admittedly the breach was not cured by the Corporate Debtor. Hence the Leave and Licence agreement stood terminated within 30 days from the period of notice i.e. with effect from 31/05/2019. (b) Clause 21.3 of the Leave and License agreement is clear that if the Applicant did not refund the security deposit, the Corporate Debtor would be entitled to continue to occupy the premises until receipt of the entire security amount without payment of any further license fee during the period of occupation. In view of this the Respondent was not required to hand over the possession till the security deposit was refunded and also need not to pay any license fee for the premises from 1st June, 2019. (c) The submission of the counsel for the Applicant that the Respondent used the premises while keeping the Corporate Debtor as a going concern and is duty bound to protect the Corporate Debtor etc. does not have any relevance, in view of the fact that the agreement stood terminated on 31st May, 2019. The submission that there is an agreement for service and the Corporate Debtor enjoyed the service etc. had to meet the same fate as Leave and Licence agreement itself was terminated. (d) The Applicant even though made elaborate pleadings, the letter dated 17/08/2019 written by the Respondent to the Applicant, was not enclosed to the Application (furnished in the reply). This letter makes it abundantly clear that the Respondent did not require the premises during the CIRP and the Applicants insistence on the factor that the RP could utilise the premise for NCLT, MUMBAI BENCH, COURT No. - I

I. A. No. 453/MB/2020 In C.P. (IB) No. 2205/MB/2019 Page 13 of 13 CIRP may not be helpful to the Applicant in aid of this Application. (e) The Applicant is not entitled to any payment with respect to the licence fee after 31st May, 2019. Since the security deposit is with the Applicant to ensure the payment of licence fee, the Applicant shall refund the security deposit to the Respondent after deducting the licence fee payable from 1st March 2019 to 31st May 2019. (f) On receipt of the balance security deposit, the Respondent shall, within 7 days, hand over the vacant possession of the premises to the Applicant. Sd/- Sd/-

V. Nallasenapathy Janab Mohammed Ajmal Member (Technical) Member (Judicial )

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Explained | What are the challenges Jet Airways faces before it can take off again?

How viable could jet airways be, and what is the current aviation industry scenario.

Updated - November 28, 2021 09:50 am IST

Published - June 26, 2021 09:54 pm IST

FILE PHOTO: Jet Airways aircrafts are seen parked as an IndiGo Airlines aircraft prepares to land at the Chhatrapati Shivaji Maharaj International Airport in Mumbai, India, April 18, 2019. REUTERS/Francis Mascarenhas/File Photo

The story so far: Two years after Jet Airways — at the time India’s second-largest full-service airline — halted operations in 2019 as it ran out of cash, the carrier has a real chance at getting airborne again. The Mumbai Bench of the National Company Law Tribunal (NCLT) this week approved a resolution plan from a consortium comprising UAE-based businessman Murari Lal Jalan and U.K.-based Kalrock Capital, clearing the decks for the airline’s takeover and a potential revival.

What is the resolution plan approved by the NCLT?

Against the claims totalling ₹15,432 crore that the resolution professional had admitted from operational and financial creditors, the Jalan-Kalrock consortium has offered to pay creditors, including banks, ₹1,183 crore over a five-year period.

Also read | Seven-member monitoring panel to manage Jet Airways under resolution plan

Of this, the first tranche of ₹280 crore would be paid in cash after 180 days of the new promoters taking ownership of the beleaguered airline. A second instalment of ₹195 crore would follow in 730 days. The balance would be paid through a mix of cash, proceeds generated from the sale of assets and from the cash flows generated by the airline annually.

Banks would also get a 9.5% stake in the airline, while the consortium would hold 89.79%. Employees would get to own 0.5% of the airline’s equity capital, while public shareholding would be at 0.21%.

Based on this offer, the Committee of Creditors, led by the State Bank of India, had voted the consortium as the winning bidder last October. “That the lenders agreed to such a massive clean-up is surprising and it can at best be termed as a face-saver,” said Kapil Kaul, CEO & Director, CAPA Advisory.

Are there any caveats to the proposal?

When Jet Airways halted operations in 2019, the government distributed its airport slots (the time-specific landing and take-off rights at various airports) among various other Indian carriers. At the time, the government had stated that the move was only “temporary” and that the airline’s new owners could get the slots back. However, the government has since reversed its position. It informed the NCLT that the slots could not be returned to the new owner of Jet Airways as other airlines had made investments in acquiring additional planes to bolster capacity and utilise the slots. The Jalan-Kalrock consortium has maintained that the offer to acquire the airline would be meaningless without the coveted time slots.

Also read | ‘Jet’s winning bidder cannot claim airline’s original slots’

The NCLT, in its oral ruling on June 22, did not address the issue in detail and just set a 90-day period for the consortium to work with the Ministry of Civil Aviation and the Directorate General of Civil Aviation to resolve the matter and seek various regulatory approvals.

Will it be difficult to get slots?

According to a senior government official privy to discussions between the Jalan-Kalrock consortium and airport operators, acquiring aiport slots will not be much of a hindrance.

“The Airports Authority of India has said that it does not have a problem in allotting new slots,” said the official, who spoke on condition of anonymity. “Delhi airport is willing to give 15 departure and 15 arrival slots and has said that more slots will become available after its fourth runway is ready. Mumbai airport, too, is willing to discuss the matter with the new owners. Availability of airport slots is a non-issue today as airlines are not able to operate flights on all the slots allotted to them because of a dip in travel demand,” the official added.

However, while obtaining a certain number of basic slots may not be a problem, the availability of premium slots, such as early morning departures out of Delhi and Mumbai, which Jet Airways had previously held, could end up being a thorny issue.

What other issues need to be addressed before the airline can take to the skies?

Resolution Professional Ashish Chhawchharia has said the airline could start flying by the end of this year. Before that, it will have to obtain various approvals and certifications, including an air operator’s permit, security clearances for the new owners, airworthiness of planes, permission to import planes, etc. The induction of pilots and their refresher training could take two to three months if the new owners rehire old employees. Similarly, cabin crew and engineers would also have to undergo refresher training.

The consortium will also need to hire a dedicated management team to run the airline and help it negotiate fresh contracts for the supply of a range of flight-related services, including fuel, catering and ground handling.

How viable could Jet Airways be and what is the current aviation industry scenario?

Jet Airways may face big challenges once it resumes operations, given the present state of the sector.

The COVID-19 pandemic has resulted in a drastic fall in passenger demand. The number of domestic travellers shrank to 53 million in FY21 from 140 million in FY20. This forced airlines to ground 50%-70% of their fleet and fly half-empty planes, resulting in massive losses. The country’s largest airline, IndiGo, reported a decline in revenue from flights by almost 60% in financial year 2021.

CAPA has forecast total losses for Indian airlines over two years of the pandemic to be about $8 billion and has estimated that airlines would need almost $5 billion of capital infusion just to survive. In such an environment, a new player would need deep pockets.

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Explained: The bank fraud case that led to Jet Airways founder Naresh Goyal's arrest

Jet Airways founder Naresh Goyal was arrested on Friday in a money-laundering case linked to an alleged bank fraud of Rs 538 crore at Canara Bank. The case stems from an FIR of the CBI registered on 3 May against Jet Airways, Goyal, his wife Anita and some former company executives

Fresh troubles are mounting for Jet Airways, India’s private airline as the Enforcement Directorate late Friday night arrested its founder Naresh Goyal in a money laundering case linked to an alleged bank fraud of Rs 538 crore at the Canara Bank.

He was taken into custody under the Prevention of Money Laundering Act (PMLA) following a long session of questioning at the central agency’s office in Mumbai, reported PTI .

The 74-year-old is expected to be produced before a special PMLA court in Mumbai on Saturday where the ED will seek his custodial remand, the news agency reported citing the officials.

Also read: DGCA ‘renews’ Jet Airways’ air operator certificate

The money laundering case stems from an FIR of the Central Bureau of Investigation (CBI) registered on 3 May against Jet Airways, Goyal, his wife Anita and some former company executives in connection with the alleged Rs 538-crore fraud case at the Canara Bank.

The CBI FIR was registered on the bank’s complaint which alleged that it sanctioned credit limits and loans to Jet Airways (India) Ltd (JIL) to the tune of Rs 848.86 crore of which Rs 538.62 crore was outstanding.

Also read: Naresh Goyal’s personal ambition holds Jet Airways back from resurrection; is slow death awaiting India’s once favoured airline?

Raids and allegations

The CBI had said the account was declared “fraud” on 29 July 2021.

The bank alleged that the forensic audit of Jet Airways (India) Ltd (JIL) showed that it paid “related companies” Rs 1,410.41 crore out of total commission expenses, thus siphoning off funds from JIL.

The agency claims that the airline spent Rs 1,152.62 crore on professional and consulting costs between 1 April 2011 and 30 June 2019. Key managerial staff members are also allegedly related to these businesses, which have been identified as the source of suspicious transactions totalling Rs 197.57 crore.

According to the probe, Jet Airways paid 420.43 crore of the total 1,152.62 crore in professional and consultancy fees to organisations whose business nature did not correspond to the service descriptions on their invoices.

“As per sample agreement of JIL, it was noted that the expenses of General Selling Agents (GSA) was to be borne by GSA itself and not by JIL. However, it was observed that JIL has paid various expenses amounting to Rs 403.27 crore which is not in tune with the GSA,” the complaint now part of the CBI FIR alleged.

It added personal expenses such as salaries of staff, phone bills and vehicle expenses among others of the Goyal family were paid by JIL.

Among other allegations, it surfaced during the forensic audit that funds were also siphoned off through Jet Lite (India) Ltd (JLL) by way of making advance and investing and subsequently writing off of the same by making provision. JIL diverted the funds for subsidiary JLL in the form of loans and advances and investments extended.

Goyal was taken into custody on Friday following a long session of questioning at the ED’s office in Mumbai. The CBI conducted a raid on Jet Airways’ old offices and the founder’s residence on 5 May in relation to the Canara Bank fraud. The Enforcement Directorate (ED) had carried out eight raids against Goyal and others involved in the case in July.

Also read: From cocaine money laundering to fake names: The long list of scandals at Credit Suisse

Another similar case

In February, another money laundering case against Goyal, linked to alleged cheating and forgery filed by Mumbai-based Akbar Travels, was quashed by the Bombay High Court after the Maharashtra Police filed a closure report stating it found no substance in the complaint and the dispute seemed to be civil in nature.

As this ED case was based on police FIR, and was the predicate offence for filing a money laundering case, it was declared quashed by the high court.

A division bench of justices Revati Mohite Dere and Prithviraj Chavan quashed the ECIR (Enforcement Case Information Report or the ED equivalent of an FIR) registered on February 20, 2020, and all proceedings against Goyals on the ground of “being illegal and contrary” to law.

Goyal founded Jet Airways as a limited liability corporation in April 1992.

During the financial crisis in March 2019, he and his wife stepped down from the Jet Airways Board of Directors. In April same year, a severe cash shortage and growing debt forced the airline to discontinue operations.

In June 2021, following a protracted insolvency procedure, the airline was acquired by a partnership between tycoon Murari Lal Jalan of the UAE and London-based Kalrock Capital.

With inputs from PTI

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