Jet Airways: A Case on Bankruptcy Filing
| Case Code: FINC196 Case Length: 10 Pages Period: 2007-2019 Pub Date: 2022 Teaching Note: Available |
Price: Rs.300 Organization: Jet Airways (India) Limited Industry: Transport & Logistics Countries: India Themes: Bankruptcy & Turnaround Management, Business Failure |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Financial Crisis Due to Rising Costs and Competition
Jet Airways purchased Air Sahara in 2007 to compete with Kingfisher and low-cost carriers like IndiGo, Air Deccan, and SpiceJet. It paid an exorbitant Rs 14.5 billion for the airline and rebranded it as ‘JetLite’..
Auditors Raise Red Flag
Independent auditors of Jet Airways in their reports between FY12 and FY18 recorded their apprehensions about the company’s ability to continue operations. The auditors mentioned in their reports that the ‘Going Concern’ assumption would be relevant only if Jet Airways was able to complete the various initiatives it had started and/or if the company was able to raise sufficient funds or generate a cash flow to not only fulfill its liabilities but also to support its subsidiaries such as JetLite..
Massive Debt and Bank-Led Provisional Resolution Plan
By the end of the September 2018 quarter, Jet Airways' gross debt stood at Rs. 84.11 billion, which also included aircraft debt of Rs. 18.51 billion. To tide over the crisis, Naresh started looking for strategic investors to pump in funds. He held discussions with the Tata Group, an Indian multinational conglomerate, but saw no light. Etihad Airways refused to invest further until Naresh stepped down..
Cancellation of Flights
Jet Airways had a fleet of 119 aircraft and made 600 domestic flights and 380 international ones a day at its peak. Of these, 17 aircraft were owned by Jet Airways while the rest were leased. Owned aircraft were collateralized against funds raised to purchase these aircraft..
Resignation of Key Personnel
On May 14, 2019, four key management personnel of Jet Airways, Dube; Amit Agarwal, Deputy Chief Executive Officer and Chief Financial Officer; Kuldeep Sharma, Secretary, and Compliance Officer; and Rahul Taneja, Chief People Officer; resigned from their positions. Other independent directors, Ashok Chawla and Sharad Sharma, also resigned with effect from June 17, 2019. .
SBI Files an Insolvency Petition
State Bank of India led a consortium of lenders looking for a non-bankruptcy resolution for Jet Airways. Jet grounded aircraft taken on wet lease to recover a part of the debt. Bids were invited for selling a stake in Jet. Initially, Etihad Airways displayed an interest in reviving the airline but it declined to become a majority stakeholder in the company..
Exhibits
Exhibit I: Status of Various Indian Airlines Started in 1990s
Exhibit II: Selected Financial Information of Leading Players in Indian Civil Aviation Industry
Exhibit III: Percentage Power, Fuel & Water Charges to Total Income
Exhibit IV: Rising Air Turbine Fuel Price (Domestic Airlines) (In Rs. per Kilolitre)
Exhibit V: Historical Exchange Rates of USD and INR
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