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₹ 25,000 Cr claims received all but seal the fate of Jet Airways

When Jet Airways was grounded on April 17th due to what we were told was a “temporary cash crunch”, it came as no big surprise, because we were aware that the entire aviation industry was railing, and Jet specifically, was not in the best of shape. The biggest clue came when they did not paid their 20,000 plus employees for months on end. An SBI led consortium got together in an attempt to rescue the airline and considered providing it with interim funding to help it get back on its feet. When that proposal didn’t go through, they tried finding an investor for the beleaguered airline, which didn’t pan out as well. Alright, we thought, the general elections are around the corner, the Modi government cannot let such a massive airline, with so many jobs at stake, fail. Jet has to be rescued, it will fly again, we thought.

To everyone’s surprise, nothing happened. Finally, on June 20th the Mumbai bench of the NCLT admitted Jet Airways for proceedings under the Insolvency & Bankruptcy Code. The NCLT instructed the Resolution Professional to complete the process in 90 days, instead of the allotted 180 days, saying that the matter is of national importance. We were still hopeful of a quick resolution that would see Jet take to the skies again.

However, hopes of a revival of the once “king of the skies” have been seriously dented. On Thursday, the resolution professional revealed that he has received claims of a staggering ₹ 24,887 crore against the airline, from its creditors. This is a burden not many buyers would be willing to shoulder, and unless we can be proved wrong beyond logical means, we must probably reconcile with the fact that Jet Airways is headed for bankruptcy or liquidation.

Of the total claims worth ₹ 24,887 crores received, the resolution professional has admitted claims worth ₹ 8,462 crores (which is about 1/3rd), it has rejected claims of ₹ 1,380 crores and ₹ 15,045 crores worth of claims are still under verification.

Apart from financial creditors, who have the first right to proceeds from a bankruptcy resolution, Jet Airways owes money to hundreds of vendors, travel agents, general sales agents, and most importantly, it owes over ₹ 3,000 crores to employees.

An unexpected claim came from Jet Privilege, the frequent flyer loyalty program of Jet Airways, in which Jet owns 49.9% stake and the rest is owned by its strategic partner Etihad Airways. Jet Privilege has made a claim for ₹ 951 crore as an operational creditor.

Industry watchers don’t expect creditors to get more than a fraction of what they have claimed, and, as far as the resolution process goes, the age old adage comes to mind. Pray for the best but prepare for the worst.

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