Jet Airways liquidation: Story of rise and fall of what used to be India’s largest, best airline | Business News

The lenders had alleged that the JKC was not infusing money into the airline and was not meeting its obligations, while JKC accused the CoC of creating hurdles to the transfer of the carrier’s ownership and undermining efforts to recommence its operations. In a hearing before the Supreme Court in July last year, the lenders had even called for the grounded airline to be liquidated.

Allowing appeals by the lenders led by the State Bank of India (SBI), the Supreme Court set aside the NCLAT order that allowed transfer of ownership to the JKC. The apex court ruled that the resolution plan is not possible to be implemented and that JKC had “contravened” the resolution terms.

JKC, according to the resolution plan, was to pay Rs 4,783 crore and infuse Rs 350 crore as the first tranche of the payment. On Thursday, the Supreme Court bench said the NCLAT order allowing JKC to adjust the first tranche of payment against the performance bank guarantee was “perverse” and in “flagrant disregard” of its January 18 order. The apex court pointed out that the bank guarantee has to be kept alive till the resolution plan is completed, rejecting the argument that the guarantee could be adjusted against fund infusion.

Jet Airways’s take-off years

The initiation of liberalisation of the Indian economy in the early 1990s came as a watershed moment for Jet Airways’s founder Naresh Goyal. As the government allowed private airlines to operate scheduled services, Jet Airways came into existence, and launched commercial operations in May of 1993. It was then backed by Gulf Air and Kuwait Airways, which together held 40 per cent stake in the airline. At the time, a few other domestic airlines—East-West Airlines, Damania Airways, Sahara India Airlines, and ModiLuft—took to the skies. Except for Sahara, the other three airlines disappeared from the map within a few years.

As Jet Airways emerged as the major challenger to government-owned carriers Indian Airlines and Air India, Goyal purportedly made efforts—using his clout and network in the government and among politicians—to ensure that his airline charted a course of rapid growth. A number of aviation industry insiders believe that Goyal was behind the scuttling of a proposed joint-venture airline between the Tata group and Singapore Airlines in the mid-1990s, and even the Tata-Singapore Airlines attempt to pick up 40 per cent stake in Air India in the early 2000s.

Jet Airways had already become the airline of choice for Indians, offering world-class service that put it way ahead of Indian Airlines and Air India in the eyes of flyers. The next few years saw Jet Airways going international and rapidly expanding its domestic market share. It had a rather successful IPO in 2005 and was the market leader on most counts.

While Jet Airways was on the ascent and government-owned airlines were losing ground, new entrants were emerging in India’s aviation space. Low-cost carriers like Air Deccan, SpiceJet, IndiGo, and GoAir (later rebranded to Go First), and Vijay Mallya’s flamboyant full-service carrier Kingfisher Airlines were beginning to change the contours of Indian aviation.

Turbulent skies

Perhaps these developments forced Goyal’s hand in acquiring Air Sahara in 2007 for over Rs 2,200 crore, a valuation that many believed was quite rich. Costs were also piling up for Jet Airways on the international operations front. The airline had ordered nearly two dozen wide-body aircraft from Boeing and Airbus and was applying for international routes at a rapid pace, but without having in-house expertise and inadequate personnel training for operating long-haul flights.

At the same time, fare wars began among Indian airlines as low-cost carriers gained ground. To make matters worse, global oil prices shot up in 2008 and the year later saw the world slipping into a financial crisis, both of which had a significant impact on the aviation and travel sectors in various parts of the world. The surge in oil prices was a major headache as along with oil, prices of jet fuel—which is a major operational cost for airlines—skyrocketed.

Under pressure from low-cost carriers and grappling with a difficult operating and economic environment, full-service carriers Jet Airways and Kingfisher Airlines borrowed heavily. In 2012, Kingfisher had to shut shop. Jet Airways, too, was not in great financial health and was scouting for funds and investors.

Notably, the airline got a lifeline of sorts with the government changing its FDI policy to allow foreign airlines to own up to 49 per cent stake in Indian carriers. Many see Goyal’s hand in this policy shift by the government. In April 2013, Abu Dhabi-based Etihad Airways announced that it was acquiring a 24 per cent stake in Jet Airways for over Rs 2,000 crore.

Crash and burn

Over the next few years, Jet Airways continued to slug it out with a growing IndiGo. While fare wars took their toll, generally lower fuel prices in the 2015-2017 period kept Jet Airways going. But things took a turn for the worse by 2018, as global oil and fuel prices started rebounding, and the domestic aviation space had a new leader in IndiGo, which through its vast network, single-aircraft type fleet, and low-cost financial and operational model, could dictate fares. By then, allegations that Goyal was siphoning off funds from his airline had also surfaced.

After mounting losses for over a year and a heavy debt burden, in April 2019, Jet Airways was grounded after the SBI-led consortium of banks rejected the carrier’s request for emergency fund infusion of Rs 400 crore that the airline needed to stay operational. In the preceding weeks, the lenders had forced Goyal, his wife Anita, and two other members of the Jet Airways board to step down.

Though Goyal tried to get Etihad to infuse more funds in Jet Airways by acquiring additional stake, the talks were not successful. The Tata group was also reportedly in the fray to acquire Jet Airways, but even that did not materialise.

Jet Airways flew to over 65 destinations in India and across the world, including Europe, the Middle East, Southeast Asia, and North America, with hubs in Mumbai, Delhi, Bengaluru, and gateways in Amsterdam, Paris, London, and Abu Dhabi. It operated 124 narrow-body and wide-body aircraft on nearly 1,000 domestic and international routes, before suspending operations.

Later that year, Goyal was barred from leaving India as government agencies were investigating allegations of financial fraud against him. Since then, Goyal and others at Jet Airways have come under the scanner of multiple agencies, including the Serious Fraud Investigation Office (SFIO), the Income Tax department, the Central Bureau of Investigation (CBI), and the Enforcement Directorate. A Ministry of Corporate Affairs (MCA) inspection had reportedly found large-scale irregularities, including diversion of funds, at the airline. The Income Tax department also searched the carrier’s offices and found discrepancies in its books.