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    Aviation Blog Writing

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    Khushii Pancholi

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    Aviation Blog Writing

    Uploaded by

    Khushii Pancholi
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    4 views4 pages

    Aviation Blog Writing

    Uploaded by

    Khushii Pancholi

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    © All Rights Reserved
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    of 4

    Jet Airways Insolvency Case: A Journey Through Cross-Border Insolvency and

    Revival

    Introduction
    Jet Airways, a prominent Indian airline, commenced operations as an air taxi operator in 1993 and
    transitioned into a scheduled carrier by 1995. Despite its initial success, Jet Airways found itself in
    severe financial distress, leading to its shutdown in April 2019. With heavy debts, it became the first
    Indian airline to face insolvency proceedings under both the Cross Border Insolvency Protocol and
    the Insolvency and Bankruptcy Code (IBC) of India.

    The Establishment and Growth of Jet Airways


    Naresh Goyal established Jet Airways in 1993. After being incorporated under the Companies Act
    of 1956, it became a major force in the Indian aviation industry very quickly. The airline presented
    itself as a full-service provider, competing with both local and foreign carriers by providing upscale
    amenities and placing a high value on customer happiness and operational timeliness. Its ambitious
    growth into other markets was made possible by its early success.

    The bankruptcy and demise of Jet Airways


    Jet Airways struggled to maintain profitability as competition increased, especially from low-cost
    carriers like IndiGo and SpiceJet, despite its early success and market domination. High operating
    expenses, a poor development plan, and debt buildup combined to put Jet Airways under growing
    financial strain. 2019 saw the airline but eventually turned out to be expensive, adding to the
    airline's growing debt.

    (2013) interest Sale to Etihad Airways: In an effort to get critical funding amidst growing operating
    expenses and debt, Jet Airways sold a 24% interest to Etihad Airways, situated in Abu Dhabi. The
    airline was able to temporarily continue operations because to the strategic alliance, which gave it
    much-needed liquidity. Nevertheless, Jet's long-term financial issues could not be resolved by this
    cash injection.
    Jet Airways' collapse and bankruptcy
    As competition grew, especially from low-cost carriers like IndiGo and SpiceJet, Jet Airways found
    it difficult to maintain profitability despite its early success and market domination. Jet Airways w
    as under growing financial strain due to a combination of high operating expenses, an ineffective
    expansion plan, and debt buildup. In 2019, the airline owed more than ₹8,500 crore, or around $1.2

    billion, in debt and was unable to pay its loans in full.

    Following its inability to get emergency finance, Jet Airways was forced to halt operations in April
    2019. In accordance with India's Insolvency and Bankruptcy Code (IBC), the airline was admitted
    to insolvency proceedings. This was the first time an Indian airline had filed for bankruptcy under
    the terms of the Cross Border Insolvency Protocol, underscoring the case's complexity in light of
    Jet's global operations and the participation of several creditors.

    The ascent and eventual decline of Jet Airways serves as a lesson in the unpredictable aviation
    sector, where long-term success depends on operational effectiveness, market adaptation, and
    prudent financial management. Jet Airways' future is still unclear despite attempts to bring it back,
    as it continues to navigate regulatory hurdles and financial restructuring.

    Initiation of Insolvency Proceedings


    The State Bank of India (SBI) filed a petition under Section 30(6) read with Section 31 of the IBC,
    2016, at the National Company Law Tribunal (NCLT), Mumbai, initiating the insolvency
    proceedings against Jet Airways. Ashish Chhawchharia was designated as Jet Airways' Resolution
    Professional (RP), and SBI, the financial creditor, started the process. The Jalan Fritsch Consortium,
    a collaboration between Mr. Florian Fritsch of Kalrock Capital Partners Ltd. and Mr. Murari Lal
    Jalan, a non-resident Indian residing in the United Arab Emirates, filed an application with the RP
    asking for approval of a resolution plan.

    Resolution Plan and Tribunal's Approval


    On June 22, 2021, the NCLT in Mumbai accepted the resolution plan that the consortium had
    presented, marking a significant milestone in the resolution process for Jet Airways. The panel
    ordered the partnership to get the required licenses and authorisation to relaunch the airline within
    ninety days following two years of insolvency proceedings.
    The Ministry of Civil Aviation (MoCA) and the Directorate General of Civil Aviation (DGCA)
    objected, primarily over the consortium's claim to the historic airport slots that Jet Airways had
    previously occupied. The NCLT denied the MoCA and DGCA's appeals, stating that Jet Airways
    could not have claimed ownership of the slots as it did not have them at the time of its bankruptcy.
    The Supreme Court's decision in Rajendra K. Bhutta v. Maharashtra Housing and Area
    Development Authority & Anr. (2020) 13 SCC 208 provided support for this decision.

    Specifics of the Plan for Resolution


    In October 2020, the Jalan-Kalrock consortium's resolution plan was authorised by the Committee
    of Creditors (CoC). In order to pay off creditors and acquire an 89.79% share in Jet Airways, the
    plan called for an investment of ₹600 crore to be made in the first two years. It described a

    repayment schedule for creditors that would increase from ₹131 crore at the end of the third year to

    ₹259 crore at the end of the fifth year. The airline's cash flows and the sale of non-core assets, such

    as fancy vehicles and real estate, would be used to finance the payback.

    The Jet Airways name was also kept by the new promoters, who intended to restart operations with
    25 aircraft and prioritise international routes after establishing New Delhi as their headquarters. The
    Association's Articles (AoA) The Memorandum of Association (MoA) were to be revised, and
    under the oversight of a Monitoring Committee, all required legal permissions were to be secured.

    International Bankruptcy and Cooperation with the Dutch Court


    A noteworthy feature of Jet Airways' bankruptcy was the concurrent legal processes in India and the
    Netherlands. Following the grounding of a Jet Airways airplane in Amsterdam for nonpayment of
    outstanding debts to a European cargo company, the Dutch court opened bankruptcy procedures.
    The NCLT, Mumbai, was asked to recognise the Dutch proceedings by the administrator appointed
    by the Dutch court. The foreign court's ruling was rejected by the NCLT, who cited the IBC's lack
    of a cross-border insolvency framework as justification.

    Following that, the Dutch administrator contacted the National Company Law Appellate Tribunal
    (NCLAT), which resulted in the creation of establishing a protocol for cross-border insolvency. As
    the "centre of main interests," India was acknowledged, and the Dutch proceedings were classified
    as "non-main insolvency proceedings." In order to prevent authority overlap, the NCLAT allowed
    the Dutch administrator to watch but not take part in the CoC sessions.

    Requirement for a Comprehensive Framework on Cross-Border Insolvency


    The Jet Airways case emphasises how important it is for India to have a clear cross-border
    insolvency law. Cases involving corporations with assets and creditors spread across many
    jurisdictions, such as Jet Airways and Videocon, have become more complex due to the absence of
    such a structure. Although Videocon was permitted by the NCLT to incorporate its foreign assets in
    its bankruptcy proceedings, these determinations are made case-by-case. An all-encompassing legal
    structure is essential for effectively handling cross-border insolvencies in the future.

    Conclusion
    Jet Airways’ insolvency proceedings have paved the way for discussions on cross-border insolvency
    in India. While the airline's revival is a positive outcome, the legal and procedural challenges
    encountered during the process underscore the urgent need for a structured cross-border insolvency
    mechanism. This case serves as a landmark in Indian aviation law and corporate insolvency, setting
    a precedent for future cases involving multinational creditors and assets.

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