The Crashing Down of Jet Airways: What Should Airlines Learn Reduced aviation taxes, uniform ATF pricing and investments by corporates/ institutions alike can prevent airlines from facing a turbulent future

Putting an end to the five year long saga of reviving Jet Airways, the Supreme Court directed the liquidation of the airline after a consortium of UK-based Kalrock Capital and the UAE-based BIZ Experiences, Murari Lal Jalan, failed to implement its resolution plan. Liquidation is the process of closing a business and distributing its assets to claimants: the sale of assets is used to pay creditors and shareholders in the order of priority.

Explaining the liquidation further and its impact, Sanjay Lazar, CEO, Avialaz, said, "The total book value of all Jet's assets in India and abroad are about INR 1,000 crore. This won't yield more than INR 600 crore in auction. The admitted debt or outstandings recorded in 2019 by the national company law tribunal (NCLT) was about INR 15,723 crore, which has since ballooned more due to interest and parking charges. The employees will literally get nothing, which is the saddest part, so many have waited for years – and some stood by loyally for a restart. The banks, creditors & vendors will get first shot."

The airline was incorporated in april 1992 by Naresh Goyal, and it began full-fledged operations in 1995 with international flights added in 2004. It grew to be one of the largest airlines in India, with a 21.2 per cent passenger market share in february 2016. It was an undisputed leader. However, things took a different turn with its competitors, mainly Spicejet and Indigo, lowering ticket fares. Soon it was forced to follow suit, resulting in financial losses. In October 2017, the passenger market share dropped to 17.8 per cent. The downward slide continued and resulted in bankruptcy in 2019. Despite efforts to secure emergency funding, Jet Airways was unable to meet its financial obligations and the last flight was on April 17, 2019, on the Amritsar to Mumbai route.

In 2021, Jet Airways was taken over by the consortium comprising UAE-based businessman Murari Lal Jalan and Kalrock Capital Partners – with plans to revive the airline in 2022, which never happened due to financial problems and proceedings with the NCLT. After buying some more time, the airline was expected to restart operations by the end of 2024, however, all hopes ended with the liquidation order by the apex court. "The Indian insolvency process does not work for airlines, unlike say USA or Europe, so no airline should get there," said Lazar, with over 30 years of experience in the sector.

Could the company have done something differently? Lazar said that although hugely successful and a popular airline, it was never profitable for most of its history, barring once in 2014. "Too many murky deals and related parties in the quest to grow large in a short span were the primary reasons for the downfall," he added.

To prevent airlines from going bankrupt, the CEO said that taxes should be reduced on aviation, ATF pricing should be made uniform across India and corporates, institutions should invest in airlines. "With respect to insolvency, we have lots of work to do on the drawing board. The government needs to have a committee of experts from the industry, to ensure that lender and airline friendly terms are in place, to enable restart of airlines. The current rules actually ensure that the airline will never restart!," he said.

"The Indian aviation sector has some issues due to taxation and costs, but is buoyant and good airlines that are well run, thrive and not just survive. Indigo has performed well and even the Air India group has reduced its losses by 60 per cent, Akasa Air is healthy. Spicejet has attracted fresh investments. We have three regional carriers that have started off," he explained.

India is the third largest aviation market, with 2,000-plus aircraft on order and 250 airports in making by 2030.