It may soon be time for Jet Airways to fold, with multiple reports suggesting that both Etihad Airways and the Hinduja group, who were bidding to bail out the airline, may back out. With Etihad and Hinduja taking a step back, Jet’s lenders, a consortium of banks led by the State Bank of India to whom the company owes over Rs 8,000 crore, may have to file for insolvency.
“The promoters of the (Hinduja) group feel that it’s too risky for them to get involved (with Jet Airways) at the moment, due to ongoing government investigations and the recent insolvency pleas submitted by operational creditors at the National Company Law Tribunal (NCLT),” Livemint quoted a source as saying.
Jet Airways stock took a hit on Tuesday amid these reports. It closed 12.8% lower on NSE on Tuesday. Making this worse for the battered airline is that two of the airline’s suppliers — Shaman Wheels and Gaggar Enterprises — moved the National Company Law Tribunal (NCLT) and sought for insolvency proceedings to be brought against the company. On Tuesday, the NCLT reportedly issued notices to the banks and to Jet Airways, and has posted the matter for hearing on Thursday.
A CNBC TV18 report, quoting sources, says that lenders do not want to go down the NCLT route and are awaiting the outcome of the plea filed by operational creditors.
A banker told the Economic Times that if the NCLT chooses to admit the petition, it could mean the airline’s end. “We are not very hopeful of recovering our dues in bankruptcy as the other liabilities are much bigger than bank loans. We will have to see if other creditors will be treated on par with financial creditors,” the person told the business daily.
Additionally, multiple reports indicate that the National Aviator's Guild, the body of Jet pilots, is also planning to move the NCLT for insolvency proceedings to recover unpaid salaries.
Jet owes over Rs 8,000 crore only to banks, and liabilities of the airline including unpaid salaries is reportedly close to Rs 15,000 crore.
However, if Jet Airways is admitted to NCLT, under bankruptcy resolution lenders may recover only a fraction of the Rs 8,400 crore the airline owes them. The total liabilities of the airline, including unpaid salaries and vendor dues, are nearly Rs 15,000 crore.
Bids had been invited to resurrect the company by bankers by selling up to 75% of the stake. The airline received multiple bids, but none of the companies chose to submit a final bid.