Jet Airways Liquidation: Case Study and Insolvency Summary

Jet Airways Liquidation: Case Study and Insolvency Summary
Jet Airways Liquidation: Case Study and Insolvency Summary

By – Sakya Singha Chaudhari, Shriya Gambhir, Debasmita Goswami

India ranks among the leading players in the global civil aviation ecosystem1. Aviation in India began in the early twentieth century, with the first commercial aviation flight on  February 18,  1911, from Allahabad to Naini. The sector gained significant momentum when Mr. J.R.D. Tata, often referred to as the father of Indian aviation, established Tata Airlines in 1932. Following the nationalization of Tata Airlines in 1953, the state-owned Indian Airlines and Air India dominated the aviation sector for decades, leaving limited room for private operators.

The aviation landscape in India changed drastically with the introduction of the open sky policy in the 1990s which allowed private airlines and Low-Cost Airlines (LCAs) to enter the market. This policy paved the way for competition and innovation, marking the advent of Jet Airways (India) Ltd. Jet Airways rapidly rose to prominence, becoming a symbol of premium service and operational efficiency in the Indian aviation sector. Despite significant regulatory and cost-related challenges, Jet Airways established itself as a profitable private airline, often considered a trailblazer in India’s aviation industry.

The Jet Airways liquidation process is emblematic of the broader struggles within the industry, including high operational costs, intense competition, and price-sensitive markets. This article delves into Jet Airways’ insolvency case summary, analyzing the factors that led to its downfall, the legal complexities during the insolvency process, and its implications for the Indian aviation sector.

However, its rapid rise was followed by an equally dramatic downfall. Critics point to its acquisition of Sahara Airlines in 2007, which, while ambitious, led to integration challenges and added financial strain2. Jet Airways became yet another name in the list of aviation casualties, alongside Kingfisher Airlines, Air Sahara, and Air Deccan in India. Globally, examples such as Aeromar in Mexico, Flyr in Norway, and Novair in Sweden illustrate the pervasive challenges faced by the aviation industry3. Most recently, Spirit Airlines in the U.S. filed for bankruptcy protection4.

What Led to the Downfall of Jet Airways?

After operating for more than two and a half decades, Jet Airways ceased operations in April 2019, marking the end of an era for a carrier that once redefined air travel in India. Its final flight, from Amritsar to Mumbai, departed at 10:30 PM on April 17, 20195. This event symbolized the collapse of one of India’s most prominent private airlines, which had built a reputation for premium service, punctuality, and customer satisfaction.

Jet Airways’ initial success from 1992 to 2004 stemmed from its ability to navigate the challenges of a regulated market. Jet was known for its premium quality services catering to business class passengers seeking reliable air travel6. However, the entry of Low Cost Airlines (LCA) in early 2000  like IndiGo, GoAir, and SpiceJet disrupted the industry’s equilibrium. These LCAs capitalized on cost-efficient operations and affordable pricing, eroding Jet Airways’ market share and profitability. Jet’s premium pricing model became increasingly unsustainable in a market dominated by budget-conscious travellers.

The acquisition of Sahara Airlines in 2007 further exacerbated Jet Airways’ financial woes. While the acquisition was aimed at expanding its market share and resources, it resulted in operational inefficiencies and increased debt. The airline faced mounting losses per seat flown, eventually falling into a debt trap that left it unable to meet its financial obligations7.

Rising fuel costs and fluctuations in crude oil prices compounded its challenges, creating a precarious financial position from which the airline could not recover.

In 2019, the National Company Law Tribunal (NCLT), Mumbai, admitted Jet Airways into insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). Although several buyers expressed interest in reviving the airline, no resolution materialized initially. In 2021, the Jalan Kalrock Consortium (JKC), comprising Kalrock Capital (UK) and Murari Lal Jalan (UAE), was declared the Successful Resolution Applicant (SRA)8. However, the resolution process faced significant hurdles, with JKC failing to meet critical conditions such as slot allocations, validation of the Air Operation Certificate (AOC), and regulatory approvals.

The Supreme Court intervened to resolve the disputes, rejecting JKC’s request for extensions and modifications to the resolution plan9. This prolonged delay not only diminished the airline’s prospects for revival and ultimate liquidation but also highlighted the challenges of attracting investors in the aviation sector.

Speedy Resolution: The Core of IBC

The Supreme Court judgment on the Jet Airways insolvency case emphasized the fundamental principles of the Insolvency and Bankruptcy Code, 2016. The Court underscored the importance of adhering to the IBC’s time-bound framework to ensure the resolution process is efficient and transparent. It also reinforced the role of the Committee of Creditors (CoC) in exercising commercial wisdom, stating that adjudicating authorities like the NCLT should respect these decisions unless there is a clear violation of the IBC10.

The judgment highlighted:

“Scrupulous following of the provisions of the Code along with behavioural and ethical discipline is especially required from the key participants of the IBC who are central to its design i.e., the Adjudicating Authorities, Corporate Debtor, Resolution Professionals, Committee of Creditors, potential and Successful Resolution Applicants, Approved valuers and Liquidators.”

The case illustrates the complexity of resolving insolvency in the aviation sector, where continuous cash flow and operational readiness are critical for survival. The Jet Airways liquidation process underscores the need for expedited solutions, as delays in resolution can erode stakeholder confidence and asset value.

Concluding Remarks

The Jet Airways failure case study serves as a cautionary tale for businesses operating in competitive and high-cost industries. The airline’s inability to adapt to changing market dynamics, coupled with financial mismanagement, ultimately led to its downfall. Despite its decline, Jet Airways leaves behind a legacy of over 25 years of pioneering services that reshaped the Indian aviation landscape.

The case also highlights the critical role of the IBC framework in addressing corporate insolvency. While the IBC provides a robust mechanism for resolution and ensures that the Corporate Insolvency Resolution Process (CIRP) is completed in a time-bound manner, the challenges faced in the Jet Airways insolvency case reveals the need for enhanced processes to manage industry-specific complexities. The lessons learned from Jet Airways’ rise and fall will undoubtedly shape future strategies for navigating the turbulence of the aviation sector.

FAQs

  1. What is the current situation of Jet Airways?

    Jet Airways was admitted into CIRP on June 2019.  Supreme Court of India ordered the liquidation of Jet Airways on November 7, 2024, ceasing all its operations permanently.   

  2. Is Jet Airways closed permanently?

    Yes, Jet Airways has been permanently closed. It went into liquidation on November 7, 2024, due to the failure of the Resolution Plan. 

  3. What happened to Jet Airways?

    Jet Airways faced financial difficulties due to rising fuel costs, intense competition from low-cost carriers, and operational inefficiencies. It ceased operations in 2019 and entered insolvency proceedings. The SRA sought a series of extensions for the fulfilment of the Conditions Precedent under the Resolution Plan which eventually led to its failure and Jet Airways went into liquidation on November 7, 2024. 

  4. Why did Jet Airways fail?

    Jet Airways failed due to:
    • Costly acquisition of Sahara Airlines.
    • Rising competition from low-cost carriers.
    • Poor financial management resulting in mounting debts
    • Fluctuating crude oil prices.
    • Inability to attract investors.
    • Inability to pay salaries to its employees 

  5. What are 5 things that went wrong for Jet Airways?

    1. Costly purchase of Sahara Airlines.
    2. Intense competition from budget airlines/LCAs
    3. Poor management decisions.
    4. Fluctuating crude oil prices.
    5. Failure to attract investors during insolvency.

  6. What role did the National Company Law Tribunal (NCLT) play in the Jet Airways insolvency case?

    The NCLT in Mumbai admitted Jet Airways into insolvency proceedings in 2019 under the Insolvency and Bankruptcy Code, 2016. It granted multiple extensions for the fulfilment of the conditions precedent and implementing the Resolution Plan.

  7. What is the importance of the Supreme Court’s judgment in the Jet Airways insolvency case?

    The Supreme Court emphasized the need for strict adherence to the time-bound framework of the IBC. The Supreme Court judgment is based on the premise that speed is of the essence for the working of the IBC Code. It further observed that extending the time limits fixed under the Resolution plan must be exercised in a circumspect manner. 

  8. What is the role of the IBC in Jet Airways’ insolvency case?

    IBC is the governing law for insolvency proceedings. The IBC provided a framework for Jet Airways’ insolvency proceedings, emphasizing a time-bound resolution process and ensuring stakeholder interests were protected.

  9. Who was the successful bidder for Jet Airways?

    The Jalan Kalrock Consortium, comprising Kalrock Capital and Murari Lal Jalan, was declared the successful bidder in 2021. 

  10. How does the Jet Airways case reflect the limitations of the IBC in the aviation sector?

    The case highlights the complexity of resolving insolvency in capital-intensive industries like aviation, where continuous cash flow and regulatory approvals are critical. Delays in meeting conditions such as AOC validation and slot allocations further complicated the resolution process.

  11. How did Jet Airways contribute to Indian aviation?

    Jet Airways was able to establish itself as a privately owned profitable airline which was a significant achievement. Being a premium airline it aimed towards catering premium quality services to its passengers in terms of punctuality, food and beverage, efficiency etc. It was successful in setting the industry benchmarks and influenced the growth of Indian aviation. 

  12. What lessons can be learned from Jet Airways liquidation?

    Key lessons that can be learned from Jet Airways liquidation include the importance of adaptability, sound financial management, competitive pricing, and timely decision-making in the aviation industry. Further, ensuring stringent enforcement mechanisms and time-bound completion of the CIRP process would prove to be beneficial.

References

  1. PIB
  2. The Hindu Business Line
  3. Economic Times
  4. BBC
  5. SPS Airbuz
  6. Economic Times
  7. IIMK Case Study
  8. SPS Airbuz
  9. State Bank of India & Ors. Vs. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch, Civil Appeal Nos. 5023-5024 of 2024.
  10. State Bank of India & Ors. Vs. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch Civil Appeal Nos. 5023-5024 of 2024.
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