As National Company Law Tribunal (NCLT) has admitted the Jet Airways for bankruptcy resolution, the shares of the company witnessed a sudden rise at BSE and NSE. State bank of India (SBI), the largest lender to the debt-ridden air carrier moved to NCLT under section 7 of IBC. The tribunal decided that the matter will be resolved in 90 days given its national importance. Under IBC, 270 days is the maximum period given for corporate insolvency resolution process (CIRP) but the Jet Airways case would be solved within 90 days.
IBC has proved a very powerful tool for corporate bankruptcy resolutions and if the Jet Airways case is solved within 90 days, there are chances of brand revival under new management. The airline held more than 15 percent of market shares in civil aviation and very powerful brand value.
Given the good reputation of the company with customers and employing more than 16,000 people, many experts suggested the revival of the company would be much better and the government should come out and help. However, the Modi government has so far refused to help as it has a very clear about ‘rule-based capitalist economy’, where the failure of business means its exit from the market.
The government operates on market economy principles and therefore the company landed for resolution under IBC. However, if some company acquires Jet Airways and appoints a dedicated management, the company could be revived given its more than 2 decades old loyalty among customers.
The lenders expect new investors to acquire the company and the operations might resume after that. Jet’s strategic partner Etihad Airways, private equity firms TPG Capital and Indigo Partners and government-backed National Investment and Infrastructure Fund (NIIF) are in the race to acquire a controlling stake in the troubled company.
Jet company operated 600 daily flights only a few months ago. The company had seen a dramatic rise and changed the rules of the aviation industry in the last two and a half decades. It began operations as taxi operator in 1993 and was granted scheduled airline status in 1995. Naresh Goyal, the person who became synonymous with the airline acquired 40 percent stake in the company from Gulf Air and Kuwait Airways in 1997. In 2004, Jet Airways became the first private company to operate an international flight. It broke the monopoly of state-led companies like Air India and Indian Airlines. The company launched an IPO in 2005 and acquired Air Sahara in 2007.
The downfall of the company started after acquiring debt-ridden Air Sahara, which proved a bad decision. In 2013, it sold 24 percent stake to Etihad Airways. However, this could not save the debt-ridden company and its market leadership continued to weaken. The entry of other low-cost airlines like IndiGo and SpiceJet further dampened the chances of revival. Jet Airways could not standby the competition posed by other efficient low-cost airlines in the market.
If the new management could take some bold decision, Jet Airways could be revived after a resolution under IBC.
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