October 13, 2022 | Author: Anonymous | Category: N/A
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Indian School of Business
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ISB297
February 24, 2022
Saumya Sindhwani | Kanchan Mahadev | Poonamjot Kaur Sidhu
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JET AIRWAYS: TALE OF THEIR TAKEOFF AND CRASH LANDING
“Grounded! Unable to Land Funds, Jet Taxies to a Halt” announced The Economic Times headline on April 18, 2019, which confirmed the persistent rumors in the airline industry. 1 This headline a year ago had prompted Surjit Trivedi to make his move. This was their chance to get in , he had thought on that fateful day. Trivedi had been the Managing Director of the Mumbai-based private equity firm Agile Group since 2012 and was the b rains behind 80% of the firm’s net financial gains in the last five years. He was a founding member of the firm, and his hard work, ably supported by the rest of team, was responsible for the firm’s current stature.
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The Hindu’s headline on July 21, 2020—“ Jet Airways Receives Two Final Bids”—had a similar effect on Trivedi. He understood they had to move quickly. He and his team had been deliberating a possible investment strategy for the cash- strapped airline since November 2018. Today’s news was a call to action, he thought. On reaching the workplace, he headed straight to the conference room. This was the final meeting before presenting their proposal to the Board of Directors. Trivedi and his team felt that Jet Airways could eventually be turned around, but they needed to convince the board. The board had serious reservations about the endeavor, considering the media coverage around the airline.
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Before meeting the board, Trivedi himself wanted to be certain about the investment and did not want to have even an iota of doubt about it. As a founding member, he did not want a miscalculated investment on his part to jeopardize jeopardize the firm’s future. In addition, he did not want a wrong investment to weaken his standing with the board. He was due for a promotion and did not want to endanger his
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chances of moving up the ladder.
He reflected on the airline once again while the strategists made the final presentation. Jet Airways survived their teething problems when most other airlines that started along with it went down, but they could not sustain their success, he felt. The way matters stood, the writing was on the wall: the collapse was imminent.
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An industry that transports paying passengers and freight using airplanes, and sometimes helicopters, on scheduled routes. Professor Saumya Sindhwani, Professor Kanchan Mahadev and Dr. Poonamjot Kaur Sidhu prepared this case solely as a basis for class discussion. This case is not intended to serve as an endorsement, a source of primary data, or an illustration of effective or ineffective management. This case was developed under the aegis of the Centre for Learning and Management Practice, ISB.
Copyright @ 2022 Indian School of Business. The publication may not be digitised, photocopied, or otherwise reproduced, posted or transmitted, without the permission of the Indian School of Business.
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He had met Naresh Goyal, the founder, and promoter of Jet Airways, a couple of years ago when his airline was an industry leader. While listening to the presentation, Trivedi tried to ascertain if it was a leadership failure, a strategic failure, a financial miscalculation, or maybe a combination of all these that had dragged the airline down. THE INDIAN AIRLINE INDUSTRY
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The civil aviation industry recorded consistent global growth over the past two decades. Although the growth cooled a little in 2018, the number of air passengers still grew at a positive compound annual growth rate.2 The aviation sector in India evolved beyond recognition over the last few decades. In 1953, the Government of India introduced the Air Corporation Act, which led to the merger of eight preindependence domestic airlines: Airways India, Air Services of India, Bharat Airways, Deccan Airways, Himalayan Aviation, Indian National Airways, Airways, and Kalinga Airlines along with the domestic wing of Air India. This merged entity, called Indian Airlines, catered to all domestic air travel. International travel was handled by Air India under the new Act. The Government of India constituted the Bureau of Civil Aviation Security in 1987, to lay down standards and measures regarding the security of civil flights at international and domestic airports. The Government then constituted the Airport Authority of India in 1995 by merging the International Airport Authority of India (1972) and the National Airport Authority (1986). It was charged with the mission of providing high-quality, safe, and customer-oriented airports and air navigation services, which in turn would act as a catalyst for economic growth in the areas they operated in. Under the International Civil Aviation Organization (ICAO) 3 agreement, India established the Directorate General of Civil Aviation (DGCA)4 in 2020.
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For nearly four successive decades, the aviation sector was completely monopolized by Air India and Indian Airlines. With the introduction of the New Economic Policy and liberalization in 1991, this monopoly was expected to be challenged. The Air Corporation Act 1953 was repealed and replaced by the Air Corporation Act 1994, enabling private operators to provide air transport services. However, contrary to policymakers’ expectations, the opening of the Indian market saw a sluggish private influx in all sectors. It eventually did pick up, and in 2018 more than 80% of the civil aviation
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sector was East-West made up of privatefollowed players. The first private player toinenter IndianIndia aviation sector was Airlines, follow ed by Sahara Airwaysnational and Jet Airways 1993.the By 1995, had three other private domestic airlines: Damania Airways, ModiLuft Airlines, and NEPC Airlines. By the end of 1995, there were around 42 (domestic and international) airlines flying to, from, and through India. Out of the six early players, due to non-profitability, East-West Airlines and ModiLuft Airlines halted operations in 1996, Damania Airways and NEPC Airlines in 1997; Sahara Airways was rebranded as Air Sahara in 2002.
2Growth
of Global air traffic passenger demand (2019, November). Statistica.com Statistica.com.. Retrieved from https://www.statista.com/statistics/193533/growth-of-global-air-traffic-passenger-demand/ 3 A specialized agency under the United Nations for managing techniques and principles related to international air navigation. 4 The regulatory body for the aviation sector in India.
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In its effort to bring Indian industries on par with global norms and boost competition, the Government of India kept introducing new reforms. Until 2001, the Administrative Price Mechanism (APM) regulated the price of aviation turbine fuel (ATF) or jet j et fuel in India. The price was determined by the Government of India, and oil marketing companies (OMCs) enjoyed fixed profits. This system was discontinued in 2001, giving OMCs the freedom to fix ATF prices in accordance with the prevailing crude oil prices in the global market and input costs incurred. 5 Over the years, the price of ATF had been consistently rising in the country, which, coupled with the taxes levied on it, made it the costliest globally. ATF is more expensive for domestic flights than for international flights as the latter are exempted from customs duty. Moreover, in April 2006, ATF used for international flights was declared a “Deemed Export,” f urther urther increasing the price gap.
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In line with global trends, low-cost carriers (LCCs)6 began entering the Indian I ndian domestic aviation sector from 2003 onward, with Air Deccan being the first. It was followed by SpiceJet in 2004 and by GoAir and Indigo in 2005. In 2004, the Government of India introduced the 5/20 rule so that Indian Airlines could go international. The rule stated that for any Indian airline to fly on international routes, it should have completed at least five years of domestic service and have a minimum of 20 aircraft in its fleet. No country other than India had such rules. This rule delayed the entry of emerging Indian LCCs into the international market.
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To continue its reforms, the Indian government constituted the Kaw Committee 7 in 2006. The committee, after considering the exponential growth of the civil aviation sector in India, recommended certain structural changes in the DGCA to cope with the sector’s growth. Along these lines, the Indian government proposed to establish an autonomous civil aviation authority, a regulatory body that would replace the DGCA and enforce the standards established by the ICAO. Further, the Government of India, under an Act of Parliament, also constituted an autonomous body, the Airport Economic Regulatory Authority (AERA), in 2009 to regulate the economic aspects of airports. In 2016, India also formulated the National Civil Aviation Polic Policyy to further aid the industry.
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From the consumer perspective, the Indian market was extremely price sensitive, not just j ust for air travel but in general as well. Conrad Clifford, Vice President of Asia Pacific International Air Transport Association (IATA), had defined India as a buyer’s market in 2018 while acknowledging the remarkable growth in the Indian aviation sector.8
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The Indian civil aviation industry was one of the fastest-growing industries in India between 2014 and 2018, registering a growth rate of 18.6%. 9 By March 2019, India had 137 operational airports, which included 81 domestic and 23 international airports in addition to private and defense airports.
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This is because ATF is not imported as a finished product but as crude oil and is processed in India. A type of airline that minimizes minimize s operational costs by eliminating fringe benefits such as food and entertainment. 7 A committee constituted by the Ministry of Civil Aviation to review the functioning of the DGCA. 8 Kotoky, A. (2018, August 27). Cheap fares killing airlines in India’s cutthroat market. Mint . Retrieved from https://www.livemint.com/Politics/kVUXYal3XuEHaybKrskg3M/Ch https://www.livemint.com/Politics/kVUXYal3Xu EHaybKrskg3M/Cheap-fares-killing-airlines-in-Indias-cutthroat-market.html eap-fares-killing-airlines-in-Indias-cutthroat-market.html 9 Sinha, S. (2019, February 8). India fastest growing domestic aviation market for 4 th year: IATA. Times of India. Retrieved from https://timesofindia.indiatimes.com/business/india-business/india-fastest-growing-domestic-aviation-marketglobally-for-four-years-in-a-row-says-iata/articleshow/67888272.cms 6
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JET AIRWAYS: BACKGROUND
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The founder of Jet Airways, Naresh, started his career in 1967 as a cashier in a travel agency owned by his maternal uncle. Over the years, he acquired an intimate knowledge of the travel business owing to stints as public relations manager and regional manager in several foreign airlines such as Iraqi Airways, Royal Jordanian Airlines, and Middle Eastern Airline. He opened his Delhi-based travel agency, Jet Air, in 1974. In April 1992, Jet Airways was incorporated as a private company with limited liability under the Companies Act of India 1956; Anita, Naresh’s wife, was one of the shareholders.
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Following an application submitted by Jet Airways in March 1993, the Foreign Investment Promotion Board (FIPB)10 of India approved the airline for foreign collaboration collaboration in June 1993. This enabled en abled foreign airlines to invest in Tail Winds, resulting in Naresh, Gulf Air, and Kuwait Air holding 60%, 20%, and 20% shares. These shares were then transferred to Tail Winds11 on May 12, 1994, which were eventually held by Naresh on behalf of Tail Winds. Jet Airways started as an Air Taxi Operator in 1993 with four leased Boeing 737 aircraft. In 1993 itself, they signed a marketing support agreement with Royal Dutch Airline (KLM). The coming years saw a steep expansion for Jet Airways in both capacity and market share. They built their brand by offering superior in-flight and ground services, enabling them to redefine the Indian flying experience. Their mission statement focused on service quality and was diligently implemented by meticulous attention 12
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to every aspect of service 1994, Airways theirscheduled airline loyalty JetPrivilege, the first privatedelivery. airline inInIndia to Jet do so. They launched were granted airlineprogram, status by the Indian government next year. The fleet size increased steadily, with Jet Airways placing orders for four Boeing 737-400 and six 737-800 aircraft 13 in 1996. That year, they became a deemed public company. Many corporate houses too saw the impending potential of the Indian aviation sector; the Tata Group was one of them. Moreover, aviation was very close to J. R. D. Tata’s heart. The Tatas wanted to enter the Indian domestic aviation sector in collaboration with Singapore Airlines and applied to the FIPB for permission in 1995. They obtained permission only in 1997. However, the Cabinet Committee on Foreign Investment of the Indian government changed the rules later the same year and excluded foreign airlines from being equity stakeholders in joint ventures with Indian companies. Jet Airways was given a fixed period to buy back their equity stake from Gulf Air and Kuwait Air, with which Jet Airways complied. This led to Naresh acquiring 100% ownership of Jet Airways. The Tata Group also
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tried bidding for Air India, which did not materialize. Maharaj Kishen Kaw, in his book titled An Outsider Everywhere: Revelations by an Insider , wrote: “The Tatas had mooted a proposal for a private airline with 40% equity contribution from Singapore Airlines. As this would have been a formidable competitor, Jet (Airways) tried hard to change the rules regarding foreign equity contribution.”15
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An agency of the Indian government managing foreign direct investment that did not come under the automatic route. It was abolished in 2017. 11 Company registered in the Isle of Man. 12 An airline loyalty program is a scheme under which enrolled members earn points for traveling with the airline, where distance, class, amount paid, etc., determine the points earned. These points act as a virtual currency that can be redeemed for travel, stay, and goods. 13 Narrow-body aircraft having a passenger capacity of around 189. 14 Former Civil Aviation Secretary (1997 –1998). 15 Reporter, B. S. (2013, February 20).The Tata’s flight story. Business Standard . Retrieved from https://www.businesshttps://www.businessstandard.com/article/companies/the-tatas-flight-story-113022000585_1.html
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In 1997, Jet Airways carried around 2.4 million passengers, securing 20% market share and coming second only to the national carrier, Indian Airlines (now Air India). Jet Airways further expanded their fleet by buying ten Boeing 737-800 aircraft during the 1999 Paris Air Show. By April 2001, Jet Airways, with a fleet size of 30, was flying 195 flights daily to 37 destinations across India. For the first time since their inception, they recorded losses in 2001 due to a fall in demand and higher expenses that year. The same year, Jet Airways became a private company again.
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In 2002, Jet Airways planned to add ten Embraer 175 regional jets.16 They were the launch customers17 for the stretched 86-seat version of the Embraer 175, but the deal fell through due to the company’s financial difficulties.18 On the service performance front, they secured the prestigious Travel Trade Gazette (TTG)19 Travel Award for Best Domestic Airline for 2002. While building their brand and capacity, they encountered several roadblocks. Allegations surfaced in 2002 that illicit funding and ties had helped in Jet Airways’ growth. The issue was raised by the then Joint Secretary at the Union Ministry of Home Affairs. The subject was raised in the Indian Parliament as well, where the true ownership of the airline was questioned. The allegations were publicly denied by the airline, which sent letters and messages to their frequent flyers and published the denial on their website. The Civil Aviation and Home ministries contemplated cancelling the security clearance for the airline. However, no such action was taken, and Jet Airways continued their growth trajectory.
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Once they established the domestic market, they entered the international market. They started their first themselves internationalinroute from Chennai to Colombo in 2004. Next year, they were granted permission to run their first long-haul flight to London (Heathrow). Jet Airways once again became a deemed public company in December 2004. Riding high on their success, in March 2005, Jet Airways floated their initial public offering (IPO), 20 which constituted 20% of their fully diluted paid-up equity, raising funds to the tune of INR 18,900 million. Naresh, while releasing the issue price, shared his delight de light at the response the IPO generated. It was oversubscribed 18.7 times when bidding closed. He announced an issue price of INR 1,100, going against his advisors, who recommended a price of INR 1,125 owing to the tremendous response.21 He reasoned that the lower issue price would help him build a long-term relationship relationship with investors. Naresh retained 80% of the company ownership. The IPO was expected to cut their debtequity ratio and help international expansion plans. The IPO catapulted Naresh into the billionaire’s club, with Forbes naming him the 16th richest person in India. 22 The same year, in October, Jet Airways
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ordered ten Airbus 330-200 and ten Boeing 777 aircraft.
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Jets designed for mid-range flights with a flight capacity of 76 passengers. First customers to order the Embraer 175 regional jets. 18 Warwick, G. (2004, August 24). Jet Airways restart Embraer talks. Flight Global . Retrieved from https://www.flightglobal.com/jet-airways-restarts-embraer-talks/56362.article https://www.flightglobal.com/jet-airways-restarts-embraer-talks/56362.article 19 Launched in 1953, it is the world’s oldest weekly travel trade newspaper. 20 The process by which a private company goes public by selling its stock to the general public. 21 Business Standard Market Bureau. (2003, March 1). Jet Airways IPO priced at Rs. 1100 per share. Business Standard . Retrieved from https://www.business-standard.com/article/markets/jet-airways-ipo-priced-at-rs-1100-per-share105022801020_1.html 22 Kapur, M. (2019, April 20). Flew too high? Jet’s Goyal through the eyes of those who worked with him. Business Standard . Retrieved from https://www.business-standard.com/article/companies/flew-too-high-jet-s-goyal-through-the-eyes-of those-who-worked-with-him-119041900862_1.html
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In April 2007, Jet Airways received the first Airbus 330-200 aircraft from the order they had placed in 2005. Jet Airways redesigned the aircraft to give customers a superior experience. They modified the aircraft to have only 308 seats against the global standard of 400. This allowed eight first-class suites, with a usable space of 26 square feet having an 83 inch bed along with a 23 inch flat screen, to be created. They made similar alterations to their Boeing 777 aircraft. Both the Airbus and Boeing aircraft were reconfigured from standard versions to offer premier services. Jet Airways hired expatriates to both fly and maintain these aircraft.23
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In May 2007, Jet Airways established an operational hub in Brussels, Belgium, in an attempt to offer better connectivity between India, Europe, North America, and Africa. The maiden flight flew in August the same year from Mumbai, India, to the United States of America with a two-hour stopover in Brussels. Concurrently Jet Airways signed a codeshare agreement24 with Brussels Airlines. Jet Airways was the first Indian private airline to develop a full-scale operational hub outside India. Naresh in a statement had said: "Jet Airways was looking for an opportunity to combine its expansion plan to USA and Canada with an efficient hub in Europe together with a stronger national carrier offering a wide network ... we have found it all at Brussels.”25 Naresh was perceived as a charismatic promoter of Jet Airways, who along with his wife was deeply
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invested He very often stated: “I am the person in Jet. When people look at Jet Airways, they lookinatthe meairline. .”26 Naresh was named Travel Entrepreneur of the Year by TTG in 2007 for his invaluable contributions to
trade in general and to aviation in particular. This was in addition to numerous awards that he had won for his contribution to the aviation industry, such as NDTV Profit Business Leadership Award in 2006 and the TATA AIG Lifetime Achievement Award in 2007. 27
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Naresh was deeply involved in his work and would often hold meetings even at his residence. The meetings held in his Mumbai or London residence were always followed by meals with family members. When in office, he held daily post-lunch meetings with department heads, calling them out publicly if necessary. His wife too held such meetings and conducted them in a similar manner.28
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Balachandran, M. (2019, April 18). Jet Airways: How Naresh Goyal lost the plot. Forbes India. Retrieved from https://www.forbesindia.com/article/special/jet-airways-how-naresh-goyal-lost-the-plot/53123/1 https://www.forbesindia.com/article/special/jet-airways-how-naresh-goyal-lost-the-plot/53123/1 24 Partnerships where two airlines allow patrons to redeem frequent flyer miles/points on each other’s frequent flyer programs. 25 Press Trust of India. (2007, August 6). Jet Airways debut in continental Europe. Economic Times. Retrieved from https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/jet-airways-debuts-in-continentaleurope/articleshow/2258858.cms?from=mdr 26 Chowdhury, A. & Mishra, M. (2019, April 22). The rise and fall of India’s oldest private airline. The Economic Times. Retrieved from https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/jet-airways-naresh https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/jet-airways-naresh-goyals-folly-how-to-crash-a-business/articleshow/68930916.cms?from=mdr 27 Naresh Goyal honored with lifetime achievement award. (2007, September 12). Retrieved from https://economictimes.indiatimes.com/naresh-goyal-honoured-with-lifetime-achievement-https://economictimes.indiatimes.com/naresh-goyal-honoured-with-lifetime-achievement award/articleshow/2362587.cms?from=mdr 28 Kapur, M. (2019, April 20). Flew too high? Jet’s Goyal through the eyes of those who worked with him. Business Standard . Retrieved from https://www.business-standard.com/article/companies/flew-too-high-jet-s-goyal-through-the-eyes-of those-who-worked-with-him-119041900862_1.html
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By 2017, Jet Airways employed a total of 15,293 employees including 1,924 pilots and copilots, 3,702 cabin crew with an additional 390 flight crew, 2,094 maintenance and repair staff, and 1,104 ticketing and sales staff. Jet Airways employed 26.2% of the total staff employed by the scheduled airlines in India (see Exhibit 1). As of March 2018, Jet Airways had a fleet size of 113 aircraft (see Exhibit 2), with 3 owned by them, 96 on operational lease, and 13 on financial lease. Their seating capacity was 1,691 (see Exhibit 2).
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Jet Airways was among the major employers in the airline industry and by the end of 2018 employed around 16,000 employees, which cost the company INR 2,995.5 million annually. For the same financial year, the operating expense was INR 247,259.9 million, which included depreciation and amortization (see Exhibit 3). Jet Airways had 700 prime slots on both domestic (Delhi, Mumbai, Kolkata, Chennai, etc.) and International (Heathrow, Amsterdam, Dubai, Singapore, China, Hong Kong, etc.) routes29 (see Exhibit 3). JET AIRWAYS ACQUIRES AIR SAHARA
Jet Airways first announced their intention to acquire Air Sahara in 2006, for INR 22,655 million.
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Around the same time, Kingfisher too made public infrastructure its desire to acquire the ailing airline. For Jet Airways, the acquisition wouldAirlines have brought in airport and rights on international routes such as Singapore and London. The Indian aviation industry at that point in time did not have a policy in place for such mergers and acquisitions, as this was the first time such a deal was happening in India. In January 2006, Jet Airways and Air Sahara signed a share purchase agreement amounting to INR 22,655 million subject to the approval of the use of airport infrastructure and security clearance of new members on Air Sahara’s board. The agreement was valid up to March 2006. The announcement of the acquisition was not favorably received by the stock market.
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Around the same time, Jet Airways announced their intention of raising around INR 36,248 million through foreign currency convertible bonds (FCCB), 30 special drawing rights (SDR),31 and American depository receipts (ADR)32 to raise funds for their future expansion plans and ease the pressure on their balance sheet.33
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In February 2006, Jet Airways infused INR 1800 million into Air Sahara to cover operational costs for February and March, and the same amount was put in by Sahara for April and May. Jet Airways also deposited INR 20,000 million in an escrow account. 34 As the Indian government nether cleared the deal nor announced a policy in March 2006 (when the agreement expired), the airlines mutually extended the share purchase agreement by 90 days. An advance of INR 5,000 million was paid by Jet
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Sourced from the company website. Special bonds used to raise money in forei gn currency (currency other than the issuing company’s home country). 31 Foreign exchange reserve assets that are maintained and defined by the International Monetary Fund. 32 Securities that allow a foreign company to trade in the United States of America. 33 Jet Airways to raise $850 m (2006, January 24). Financial Express. Retrieved July 7, 2020, from https://www.financialexpress.com/archive/jet-airways-to-raise-850-m/150587// https://www.financialexpress.com/archive/jet-airways-to-raise-850-m/150587 34 It is a third-party account that holds assets such as stocks, money, or funds on behalf of any two parties entering into an agreement or an understanding. It holds the assets for a specified period or until disbursements instructions are received. 30
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Airways to Air Sahara against the pledge of Air Sahara’s shares.35 Meanwhile, Jet Airways started the process of integration with Air Sahara by inducting their officials into the airline. They initiated decision-making on route planning, workforce, etc. Finally, on May 4, 2006, the Indian government released a comprehensive policy on airline mergers and acquisitions. Jet Airways claimed that the policy did not clarify if the deal would give Jet Airways ownership of all of Air Sahara’s airport infrastructure, and wrote to the government for clarification. The then Minister of Civil Aviation, Praful Patel said: “ The The policy cannot be tailor-made to suit any particular airline. The government is very clear on this issue. The policy that is broadly in place is based on best international models and practices.”36
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The security clearance for four of the five Jet Airways’ new members on Air Sahara’s board was received on May 29, 2006, but for the fifth member, Naresh himself, the clearance was received only on June 22, 2006. The share purchase agreement expired on June 21, 2006. During this turmoil, Air Sahara’s market share and share price both fell. Naresh announced the deferral of Jet Airways’ plans to raise INR 36,248 million through FCCBs, SDRs, and ADRs in September 2006 during the company’s annual general meeting.
Subsequently, Air Sahara filed a claim worth INR 20,000 million against Jet Airways in London for not honoring their agreement. Air Sahara claimed damages for loss of market share, brand value, and
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share accrued due to the failed acquisition Jetrenamed Airways. Air Jet Airways eventually acquired Air Saharaprice in 2007 at the cost of INR 9,062 million. by They Sahara JetLite , pitting it against Indigo in the LCC segment. Naresh termed it a profitable venture. He stated that the deal was 40% of the first proposal tabled by Jet Airways in 2006. He shared his delight at the fact that this acquisition made Jet Airways the only Indian airline with permission to fly overseas. At the time of the acquisition, Air Sahara had a fleet size of 24 leased aircraft consisting of 17 Boeing 737s and 7 Bombardier CRJs.37 Twelve of these38 were flying when Jet Airways acquired Air Sahara. Jet Airways had to make a significant investment for the repair of these aircraft. Unlike Jet Airways, Air Sahara had a paternalistic and lax work culture.
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OPERATIONAL ALLIANCE WITH KINGFISHER AIRLINES
Kingfisher Airlines started operations in May 2005, flying four Airbus A320-200’s on the Delhi–Mumbai
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route. Although they were rivals at one time, during the 2008 financial crisis, Naresh, citing the case of British Airways and United Airlines, formulated an operational alliance plan with Kingfisher Airlines in areas such as codeshare agreements, route rationalization, and shared ground handling activities while agreeing not to compete on fares. At the time of the operational alliance, the airlines together had an employee strength of 19,000, with 189 aircraft operating 1,009 flights daily to national and international destinations.
Saran, R. (2006, July 10). Jet- Sahara deal: Reasons behind the collapse of India’s most high-profile aviation merger. India https://www.indiatoday.in/magazine/economy/story/20060710-jet-sahara-deal-why-it-crashedToday . Retrieved from https://www.indiatoday.in/magazine/economy/story/20060710-jet-sahara-deal-why-it-crashed782756-2006-07-10 36 Govt not to be blamed for Jet Sahara deal failure. (2006, June 29). Economic Times. Retrieved July 15, 2020, from https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/govt-not-to-be-blamed-for-jet-sahara-https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/govt-not-to-be-blamed-for-jet-sahara deal-failure/articleshow/1689500.cms?from=mdr 37 Canadian Regional Jets. 38 Ten 737s and two CRJs. 35
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Around the same time, in an attempt to create a leaner model, Jet Airways decided to lay off some of their employees in phases. The process of separation was begun by serving termination notices to 800 employees who were on probation. Eventually, 1,900 employees were relieved of their jobs, which included ground staff, cabin crew, and pilots. Kingfisher around the same time let go 300 employees to cut costs. The issue attracted political attention. The Maharashtra Navnirman Sena (MNS), a regional political party, along with the sacked employees, protested the layoffs. The protest was strongest in Mumbai. In response, Jet Airways reversed their decisions immediately, with Naresh apologizing to the sacked employees. He said,
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"I have not been able to sleep all night. I apologize for what has happened. My management did it on the basis of the economic condition as the industry is going through a tough phase. As the father of my family, my conscience did not allow this. I didn't know that the management took this decision.”39 JET AIRWAYS’ ENTRY INTO THE LCC SEGMENT
In May 2009, recognizing the evolution of the LCC market in India, Jet Airways, which already had JetLite in this segment, launched JetKonnect, a no-frills all-economy service40 (see Exhibit 4). It started
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operating on select routes with three planes.
Within a year of operations, in April 2010, Jet Airways announced their intentions to provide in-flight meals and decided to convert a few of the front seats into business class in JetKonnect flights. By 2010, Jet Airways was operating and offering three types of flights: their original Jet Airways both on domestic and international routes, the acquired and rebranded JetLite, and the low-cost variant JetKonnect.
As running three separate entities became challenging, JetLite was merged with Jet Airways’ other nofrills brand JetKonnect in 2011; the former ceased to o perate. It was done as a part of Jet Airways’ strategic rebranding and restructuring exercise.
As LCCs gained ground in the Indian domestic market in June 2012, Jet Airways lost their number one position in terms of market share in the Indian domestic market to Indigo. Indigo had become the
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strongest competitor in the domestic market to India’s oldest private airline. More competition was on the horizon when Tata SIA Airlines limited was incorporated in November 2013, announcing the launch of another full-service LCC in the Indian domestic market, Vistara.
Indigo and the other LCCs in India kept their tickets strategically at a very low price with basic in-flight services and did not offer any complimentary food. Jet Airways, in their effort to recapture their lost market, too slashed their prices by offering discounts not just on the base fare but on the fuel surcharge as well. Air tickets in the Indian domestic market saw discounts of 30% to 50% around this time, with Jet Airways being the only full-service airline to offer such discounts.
39
Jet Airways reinstate all sacked employees (2008, October 16). India Today . Retrieved July 3, 2020, from https://www.indiatoday.in/latest-headlines/story/jet-airways-reinstates-all-sacked-employees-31754-2008-10-16 40 A service where complimentary in-flight food/entertainment, etc., are not offered.
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Another competitor, Malaysia’s biggest LCC, AirAsia, got clearance from the FIPB to operate in India in March 2013. They collaborated with Tata and Telstra41 to enter the Indian market. According to the 2013 data of the DGCA, the load factor f actor42 for Jet Airways stood at 71.5%, which was the lowest among the three major LCCs—IndiGo, SpiceJet, and GoAir —and was only slightly above Air India’s. JET AIRWAYS’ ALLIANCE WITH ETIHAD AIRLINES
P o r o
Jet Airways and Etihad Airlines (based in Abu Dhabi) in 2008 inked a codeshare agreement and a reciprocal frequent flyer partnership 43 on the Delhi – –Mumbai – –Abu Dhabi route, which was their first business alliance. The Indian government in 2012 allowed foreign airlines to acquire a stake of up to 49% in Indian airlines. In early e arly 2013, Etihad proposed to buy a stake in Jet Airways, which materialized by the year end for INR 20,196.531 million after going back and forth numerous times. In addition to equity investment, it also invested INR 7,993.35 million in Jet Ai rways’ frequent flyer program,44 gave them assistance of INR 7993.35 million for securing debt, and compensated Jet Airways with INR 3,730.23 million for their London Heathrow slots. This deal brought in an INR 39,966.75 million cash infusion to Jet Airways from Etihad, enabling Jet Airways to trim their debt from INR 111,906.9 million to INR 79,933.5 million. The deal gave Jet Airways a fresh lease on life after the significant losses recorded in the financial year 2013 –14 (see Exhibits 6, 7, and 8). Etihad earned two places on Jet Airways’ board.45
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For Etihad, this alliance them and a foothold in theextent Asian and strategic move – inbased their effort to compete withgave Emirates to a lesser withIndian Qatarmarkets, Airways.aThis Abu Dhabi – airline was focused on making Abu Dhabi the most important hub in West Asia and therefore had interests more aligned with the international market. The alliance saw numerous exits and realignments in the C-suite of Jet Airways. After stitching up the alliance, Jet Airways intended to cancel some unprofitable domestic routes in India and initiate a more structured approach to processes such as planning and cancellation of flights. Etihad had made a considerable profit in the financial year 2012 –13, an increase of 48% over the previous financial year; that gave them a lot of financial legroom.
In the same year, Jet Airways transferred their frequent flyer program to Jet Privilege Private Limited after obtaining approval from their shareholders. Jet Privilege Private Limited ceased to be a subsidiary of Jet Airways in March 2014.
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In October 2014, Etihad announced the creation of Etihad Airways Partners, which comprised Jet Airways along with five other airlines. Etihad had a minority stake in all the partner airlines: Alitalia (49%), Air Berlin (29.2%), Air Serbia (49%), Air Seychelles (40%), Jet Airways (24%), and Darwin Airline (33.3%). Making the announcement, James Hogan, President and CEO Etihad, said:
41
An Australian telecommunications and technology company. 42 An airline occupancy indicator. 43 Partnerships where two airlines allow patrons to redeem frequent flyer miles/points on each other’s frequent flyer programs. 44 A frequent flyer program is a scheme under which enrolled members earn points for traveling with the airline, where distance, class, amount paid, etc., determine the points earned. These points act as virtual currency that can be redeemed for all travel, stay, and goods . 45 Phadnis, A. (2013, November 20). All you need to know about Jet Etihad deal. Business Standard . Retrieved from https://www.business-standard.com/article/companies/all-you-need-to-know-about-jet-etihad-deal113112000302_1.html
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“We are broadening our business model to articulate and define a partner proposition for like-minded airlines which will result in synergies and efficiencies for participat p articipating ing airlines on the one side, and enhanced network choice, service and frequent flyer benefits for the consumer on the other.”46
In August 2015, Etihad’s President and CEO, James Hogan, was appointed Jet Airways’ Vice-Chairman. James Hogan along with the Etihad’s Chief Financial Officer, James Rigney, had been on Jet Airways’ board since the two airlines entered into an alliance.
P o r o
Jet Airways initiated a consultative process in November 2015 to evaluate the efficiency of Brussels as their European hub. They had operated flights to Brussels from Bangalore, Chennai, and both their Indian hubs, Mumbai and New Delhi. From Brussels, they operated flights to Toronto, New York, and Newark. In due course of time, they discontinued flights from Bangalore to Brussels in 2009 and from Chennai to Brussels and from Brussels to New York in 2012. In December 2015, Jet Airways announced their plans to shift their western hub from Brussels to Amsterdam effective from March 2016. Along with this shift, they also discontinued their codeshare agreement with Brussels Airline. GROWTH OF LCCS IN INDIA
According to a study conducted by Goldman Sachs, the market for LCCs in India was expected to double by the financial year 2023.
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After five years of operating JetKonnect, Naresh, after the annual general meeting in August 2014, announced the group’s intention to merge it with the parent company. He announced the introduction of business class seats in addition to the already existing economy seats in their carriers. The decision came after Jet Airways reported their sixth straight quarterly loss. Naresh said, "We as an airline confused customers (with multiple brands). The main aim in the tie-up will be to increase market share.”47
Toward this end, they announced full services on their no-frills subsidiaries starting from December 2014, discontinuing the Jet Airways’ buy-on-board service, and making meals complimentary with the seats sold. Vistara, a joint venture between Tata and Singapore Airlines, started operation in January 2015 with
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their maiden flight from Delhi to Mumbai. AirAsia too started its operations in India with its hub in Bangalore in June 2014. The merger of JetKonnect with Jet Airways was approved by the shareholders in April 2016. With increasing competition, pricing in the Indian domestic market became extremely competitive, with LCCs such as SpiceJet offering domestic flights for as low as INR 888 in October 2016 on select routes. Jet Airways too offered discounts on certain domestic routes. Indigo eventually became the largest carrier in the Indian domestic market by passenger carrying capacity, with a fleet of almost 227 aircraft
Etihad launches new airline alliance with “Etihad Airways Partners.” (2014, October 9). Financial Express. Retrieved from https://www.financialexpress.com/archive/etihad-launches-new-airline-alliance-with-etihad-airways-partners/1296765/ 47 Loss hit Jet Airways to merge low-cost brands JetKonnect and JetLite (2014, August 12). Business Today . Retrieved from https://www.businesstoday.in/sectors/aviation/jet-airways-to-merge-low-cost-brands-jetkonnect-and46
jetlite/story/209124.html
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and a market share of almost 50%, enabling them to bypass Jet Airways in 2017. The coming year saw more growth from these LCC players (see Exhibit 3). Commissioned Commission ed Forensic Audit of the Books
State Bank of India (SBI)48 in December 2018 commissioned a forensic audit by Ernst and Young for the period April 1, 2014, to March 31, 2018. It was speculated that the report highlighted the fact that a loan amounting to INR 33,530 million was given for JetLite (FY 2015) although Jet Airways recorded losses for the same financial year. Further, some financial aberrations concerning loans and billings recorded for JetPrivilege49 Miles were highlighted by the auditors. These reports were not confirmed by SBI or Ernst and Young (see Exhibits 6, 7, and 8).
P o r o
An income survey for the Jet Airways offices across Mumbai and Delhi was also conducted by authorities in September 2018 amid allegations of fund siphoning. Jet Airways had to defer the release of their first-quarter results during the financial year 2018 –19. The airline in a statement to Bombay Stock Exchange said, “It may be noted that the Audit Committee did not recommend the said financial results to the Board for its approval, pending closure of certain matters.”
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Following this Jetmember. Airways’ Audit Committee Chairman Srinivasan Vishvanathan quit his position. Heannouncement, was also a board
Financial Liabilities
For the financial year 2015 –16, Jet Airways had recorded a net profit of INR 1,2116.5 million —after eight years. Indigo and SpiceJet registered profits of INR 19,897 million and INR 4,072 million, respectively, for the same year. The positive swing was due to a fall in fuel prices, the greatest component of airline expense. Before this Jet Airways had recorded their last profit of INR 279 million in the financial year 2006 –07.50
Jet Airways in August 2018 had received INR 21,027 million from their domestic lender banks in the form of bank borrowing and advanced lease incentives. 51 For the same financial year, i.e., 2018 –19, the airline reported three consecutive quarterly losses of over INR 10,000 million, which led the rating
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52
agency Investment Information and Credit Rating Agency of India Limited to cut the rating of loans and bonds issued by Jet Airways from C to D. Jet Airways, in an effort to raise cash, slashed their ticket prices at the end 2018, a move that was supported by Naresh but was strongly objected to by the then CEO, Vinay Dubey.
An Indian public sector banking and financial services statutory body. It is India’s largest public sector bank. 49 Jet Airways’ Frequent Flyer Program. 50 Balachandran, M. (2016, May 26). It’s been a damn good year for India’s airlines. Quartz India. Retrieved from https://qz.com/india/693212/its-been-a-damn-good-year-for-indias-https://qz.com/india/693212/its-been-a-damn-good-year-for-indias airlines/#:~:text=It's%20turned%20out%20to%20be,in%20profits%20 airlines/#:~:text=It's%20turned%20out%2 0to%20be,in%20profits%20during%20fiscal%202016 during%20fiscal%202016 51 Press Trust of India. (2018, August 29). Jet Airways gets USD300 Million as lease incentive from banks. The New Indian Express. Retrieved from https://www.newindianexpress.com/business/2018/aug/29/jet-airways-gets-usd-300-million-aslease-incentives-debt-from-banks-1864199.html 52 An independent information and credit rating agency established by leading financial institutes (investment institutes,
48
commercial banks, and financial services) in 1991. It is headquartered in India.
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SBI, which was Jet Airways’ lead banker, for the first time made their concerns public about Jet Airways’ financial health in August 2018‚ with the chairman of the bank stating, “Jet’s loan is on our watchlist.”53 The concerns were denied by the airline in August 2018 but were acknowledged by them in January 2019 when they fell behind in payments to a consortium of banks led by SBI. When Jet Airways informed the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) about their default, their shares fell by 6.16%, closing at INR 263.75 (see Exhibit 9). As Jet Airways defaulted on loan payments, they were put in the SMA-0 category54 by the banks. In the midst of the financial crisis in the airline, free meals were withdrawn from Jet Airways’ economy class in domestic flights from January 2019.
P o r o
Jet Airways proposed that their strategic partner, Etihad, could increase its stake to bring in liquidity, and requested the SBI-led consortium of banks for liquidity assistance. It was speculated that Etihad was willing to put in more money only if it could get Naresh’s controlling stake. The lenders also wanted the founders and shareholders to put in money in the airline before they provided any further liquidity assistance. SBI devised a bank-led provisional resolution plan (BLPRP) to take ownership of the airline from its promoter, Naresh. The plan detailed how the SBI-led consortium of banks planned to revive the ailing
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airline by various measures, thethat appointment a approved new board one of did them. Airways announced on February 14, 2019, their boardofhas thebeing BLPRP. They so byJet converting part of the Jet Airways loan to equity with the consent of the shareholders in an extraordinary general meeting (EGM), making them the largest equity holder in the airline. Punjab National Bank (PNB) CEO and MD Sunil Mehta at the bankers’ event stated that the move was an effort from the banks to devise a plan to preserve Jet Airways’ value. He said, “ Let Let the entire plan be worked out first. Consortium is looking at the options, Jet's resolution is a going concern and we would like to preserve (its) value.” 55
The plan was expected to bring in liquidity of around INR 8,5000 million. This proposal from the SBIled consortium of banks was criticized by the then opposition party’s spokesperson, who called it a move of the ruling National Democratic Alliance (NDA) government to bail out a bankrupt private company. On March 25, 2019, Naresh along with his wife Anita stepped down from the board of Jet Airways.
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Naresh also ceased to be the chairman of the airline. In a statement, he said: “For me, the 22,000 employees are my own family, as dear to me as Nivaan, Namrata (his children) and my wife (Anita), and no sacrifice is too big for me to safeguard the interest of Jet Airways and the families of the 22,000 employees. For the sake of my family of 22,000 employees and their respective families I have today taken the step of stepping down from the board of Jet Airways. I became the chairman on 1st April
53 SBI says Jet Airways under watchlist for stressed accounts, Airline differs. (2018, August 12 ). Bu siness Today . Retrieved from https://www.businesstoday.in/current/corporate/sbi-says-jet-airways-und https://www.businesstoday.in/current/corporate/sbi-says-jet-airways-under-watchlist-for-stressed-accounts er-watchlist-for-stressed-accounts-airline -airline-differs/story/281250.html 54 SMA-0: 1 to 30 Days default on loan payments; SMA-1: 31 to 60 Days default on loan payments; SMA-2: 61 to 90 Days default on loan payments; Nonperforming asset (NPA): beyond 90 days. 55 Press Trust of India. (2019, February 24). SBI mulling insolvency route via NCLT to recover Jet Airways loan. Economic Times. Retrieved from from https://economictimes.indiatimes.com/industry/banking/finance/banking/sb https://economictimes.indiatimes.com/industry/banking/finance/banking/sbi-mulling-insolvency-route-via i-mulling-insolvency-route-via--
nclt-to-recover-jet-airways-loan/articleshow/68141255.cms?from=mdr
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1992, and my family is behind me and with me in this decision and I hope you hope you will support my decision too. I will miss you one and all. Thank you for your brilliant dedication and loyalty down the years. I am proud of you and wish you all a great future ahead with our Jet Airways.”56
SBI chairman Rajnish Kumar too in March 2019 had shared his belief in the value of Jet Airways. He had said:
P o r o
“We are confident that Jet Airways has value. It has a fantastic brand value and will not be put under liquidation. The media has been talking about taking the company to National Company Law Tribunal (NCLT) but let me tell you that in the case of airline companies, NCLT does not mean revival but liquidation. And Jet Airways hasn’t reached that state.”57
On April 17, 2019, the SBI-led consortium stopped extending any more credit to Jet Airways, which was forced to halt all their flights and operations the next day after the SBI-led consortium of banks rejected Jet Airways’ immediate demand for INR 4,000 million. After the announcement, the stock exchange saw the shares of Jet Airways nosedive by 30.28%, recording an intraday low of INR 166.20 (see Exhibits 5 and 9). After the grounding of Jet Airways, the Government of India temporarily allocated their domestic airport slots and overseas flying rights to other airlines, issuing a statement that all slots would be reallocated to Jet Airways once the airline became functional again.
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Before shutting down operations in April 2019, Jet Airways had a debt amounting to approximately INR 1,500,000 million. A significant part, INR 133,610 million, of this debt was owed to a consortium of 11 banks, 9 Indian and 2 international (see Exhibit 10). Jet Airways had also raised non-convertible debentures amounting to INR 7,000 million in 2015. There also existed dues on the order of INR 30,000 million to vendors, airport operators, and fuel companies. Jet Airways had not paid salaries regularly to their employees for the past few months.
JET AIRWAYS: BEFORE THE SHUTDOWN
Jet Airways had a frequent flyer program, JetPrivilege, managed by Jet Privilege Private Limited, that was engaged in managing, marketing, operating, and further developing the program. After the 2013 alliance with Etihad, Jet Airways owned 49.9% of the program, and the rest was owned by the Etihad Aviation Group. Jet awarded JPMiles to frequent flyers on booking Jet Airways flights that could be
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redeemed. As of April 2019, the program had 8.7 million members, five co-branded cards and had more than 150 program partners. Jet Privilege Pr ivate Limited stayed profitable despite Jet Airways’ turbulence. As of April 2019, Jet Airways had 21 codeshare partners, which included names such as Air Canada, Air France, All Nippon Airways, and Virgin Atlantic. As Air France was the founder member of SkyTeam and part of one of the three mega airline alliances in the global aviation industry, the agreement had significant potential. All airlines holding these agreements with Jet Airways honored tickets booked Chowdhury, A & Mishra, M. (2018, March 26). Naresh-Anita Goyal step down from Jet’s board lenders take over will look for new buyer. Economic Times. Retrieved from https://economictimes.indiatimes.com/industry/transportation/airlines https://economictimes.indiatimes.com/industry/transportation/airlines-/-/aviation/naresh-anita-goyal-step-down-from-jets-board-lenders-take-over-will-look-for-newbuyer/articleshow/68562898.cms?from=mdr 57 Jet Airways shutdown raises doubts on role of SBI, Govt. (2019, April 19). Retrieved from 56
https://www.nationalheraldindia.com/india/jet-airways-shutdown-raises-doubts-on-role-of-sbi-govt https://www.nationalheraldindia.com/india/jet-airways-shutdown-raises-doubts-on-role-of-sbi-govt
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via codeshare agreements after Jet Airways’ shutdown and consistently supported guests in their rebooking and travel arrangements.
Although the merger of JetKonnect with Jet Airways was approved by the shareholders in April 2016, it was turned down by the Aviation Ministry in May 2018. They operated as separate entities until the closure of Jet Airways. The day after the airline closed operations, its share price fell to INR 163.9, an
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85% fall from its original issue price. PROBABLE ALLIANCES
In the last quarter of 2018, Jet Airways negotiated with Etihad Airways for a possible equity infusion. However, it did not materialize. The Tata Group too was looking at a possible acquisition of Jet Airways during this period and scrutinized Jet Airways’ books and assets. The group intended to acquire a controlling stake in the airline and pursued a switch of roughly all existing vendors as a prerequisite for any prospective deal. In the acquisition talks, Naresh had offered a 26% stake along with some positions on the board, including the Vice-Chairmanship. Moreover, he wanted at least a four-year moratorium on vendor contracts. The talks fell through in November 2018.
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Delta Air Lines waswere another suitor.between Though it was never officially confirmed, media that negotiations underway the two airlines for a possible alliance inreports Octobersuggested 2018. Jet 58 Airways had entered a metal neutrality agreement with Delta Air Lines in 2017. The negotiations were not successful, due to a lack of consensus on the share price: Delta offered INR 300 per share against Naresh’s demand of INR 400 per share. The airlines did not acknowledge the development. Jet Airways was also in negotiations with TPG Capital, an American investment company, for possible joint ownership. This deal too did not materialize. GOING BANKRUPT IN INDIA
In India, until 1985, there was just one law to deal with corporate insolvency and bankruptcy: The Companies Act, 1956. Under the Companies Act, the process involved arbitration by the courts or an official liquidator, which usually was a prolonged and tedious process.
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In 2016, the Indian government brought in the Insolvency and Bankruptcy Code, which is applicable to both individuals and companies. The code gave control to creditors over the assets of the debtor, who is bound to solve the insolvency within 180 days. To aid this time-bound resolution, the code also offers immunity to debtors from creditors’ resolution claims during these 180 days. The code created Insolvency professionals59 (licensed), Insolvency professional agencies (insolvency professionals are registered with them), information utilities, adjudicating authorities (NCLT 60 for companies and DRT61 for individuals), and the Insolvency and Bankruptcy Board to effectively manage insolvencies in India.
58A
cooperative arrangement between airlines in which partners jointly plan and manage capacity, pricing, and inter-airline inter-ai rline financial settlement, so that all participating airlines share equally in i n the profits 59 Registered individuals with the Insolvency and Bankruptcy Board of India. They can act on behalf of insolvent individuals and firms. 60 National Company Law Tribunal. 61
Debt Recovery Tribunal.
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These changes were perceived by industry experts as bold and necessary and were deemed to have filled critical gaps in the corporate insolvency resolution process.
After two months of deliberations, the SBI-led consortium took Jet Airways to the NCLT on June 20, 2019. Jet Airways then had only 11 of their 123 aircraft, as the rest had been take back by the lessee of the airline. Although in accordance with the list of creditors declared by Jet Airways (India) Limited
P o r o
under regulation 13(2) ofby Insolvency and Bankruptcy Board ofINR India (IBBI) for Corporate the amount of debt claimed the creditors was approximately 400,000 million, only Persons, INR 155,250 million was admitted under the regulation.62 After hours of deliberations with the team, Trivedi had his inferences in place. Armed with clear conclusions, Trivedi made his way to his office on the third floor. Although he was more confident than before about what he should say to the board, he still had a long day ahead of him to marshal convincing arguments to support his inferences. He also understood that the airline would find an investor soon, and they had to come up with an offer of fer that was attractive enough to compete with the offers that had already been tabled.
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62
Phadnis , A & Majumder, A. (2021, June 23). NCLT clears Kalrock-Jalan resolution plan for Jet Airways with riders. Business Standard . Retrieved from https://www.business-standard.com/article/companies/jet-airways-resolution-plan-approved https://www.business-standard.com/article/companies/jet-airways-resolution-plan-approved-by-nclt-with-riders-121062200702_1.html
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Exhibit 1 Employee Strength and Distribution of Indian Scheduled Airline Operators (2016 –2017) Airline
Total Pilots and Copilots
15,293 754 14,604 6,902 2,770
Jet Airways JetLite Indigo SpiceJet GoAir
1,924 141 2,094 598 337
Distribution across Ranks Other Flight Maintenance & Crew Repair
Cabin Crew
3,702 298 3,880 1,214 549
390 1 132 Nil 79
Ticketing & Sales
Others
P o r o 2,094 304 916 725 374
1,104 Nil 217 384 477
390 10 7,365 3,981 954
Source: Handbook on Civil Aviation Statistics: A Glimpse of Aviation Statistics (2017 – – 1 18 8) by DGCA.
Exhibit 2 Fleet Statistics on Indian Scheduled Airline Operators as on July 31, 2018 S No
Operator
Type of Aircraft
1
Go Air
A320-214
Number of Aircraft
19
176
18
176
112 11
180 180
39
180
10
74
2
134
67
168
6
184
B737 MAX 8
2
168
B777-300ER
10
346
A330-200
4
254
A330-300
4
293
ATR72-500
15
72
ATR72-600 B737-700
3 2
72 134
B737-800
5
170
B737-700
3
149
B737-800
28
189
B737-900
4
212
Bombardier Q400
23
78
A320- 232
13
148
8
162
A320-271N 2
Indigo
A320-232 A320-214 A320-271N ATR72-600
3
Jet Airways
B737-700 B737-800
B737-900
4 5
6
o t N
JetLite
Spice Jet
o
Vistara
Seat Capacity
o py
A320- 251N
Source: Air Transport-I, DGCA.
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Exhibit 3 Data on the Indian Airline Industry (2018 –2019) Air India
Jet Airways
JetLite
Indigo
Spice Jet
Revenue (in INR million)
26,430.59
239,583.7
N/A
23,967.7
Operating revenue (in INR million) Operating expenses
25,508.83
232,865.3
N/A
23,020.887
30,194.09
695.81
N/A
29,970.755
5,544.995
No. of employees Fleet size Passengers (in INR million)
9,993 123 18.36
16,558 112 27.4
N/A 8 N/A
23,531 217 64.74
8,447 117 21.53
Load factor
69.0%
83.6%
85.3%
86.2%
93%
Kingfisher Red*
11,200 7,839.652
P o r o
*Ceased operations in 2012 owing to losses.
Source: Directorate General of Civil Aviation, Government of India, and annual reports of specific airlines.
Exhibit 4 Data on the Indian Airline Industry (2009 –2010) Air India
Jet Airways
JetLite
Total revenue (in INR million)
13,402.27
106,229.2
Operating revenue (in INR million)
13,108.62
Operating expenses No. of employees Fleet size Passengers (in INR million) Load factor
16,580.67 29,630 3,511 663 75%
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15,794.7
Indigo
Spice jet
Kingfisher Red
2,664.5
1,813.5
5,817
104,696.4
N/A
1,689.4
1,689.3
5,271
N/A 11,788 85 797 77.4%
N/A N/A 25 3.18 75%
2,154.8 2,300 19 N/A N/A
1,703.431 N/A 19 4.593 67.6 %
2,381.7 7,319 68 11 75.8%
Source: Directorate General of Civil Aviation, Government of India, and annual reports of specific airlines.
Exhibit 5 Jet Airways Shares Average Market Value (March 2012 –March 2018) Year 31.3.2012
31.3.2013
Market value of
o t N o
equity (in INR million)
32.7
50.6
31.3.2018 31.3. 2014
23.3
31.3.2015
48.9
31.3.2016
31.3.2017
56.6
52.5
60.8
Source: Company financials.
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Exhibit 6 Consolidated Balance Sheet Sheet as of March 31 (2013, 2015, and 2018) As of 31st March, 2013
As of 31st March, 2012
As of 31st March, 2015
8,633 -1,91,404 -1,82,771
8,633 -9,635 -1,002
11,360 -4,20,388 -4,09,028
6,86,860 36,500 15,095 7,38,455
8,77,358 42,239 12,208 9,31,805
6,60,730 1,14,841 24,792 8,00,363
2,13,080 5,42,721
2,25,715 4,28,540
3,64,429 5,42,782
Other Current Liabilities Short Term Provisions
5,12,214 11,777 12,79,792
4,60,448 9,411 11,24,114
5,81,137 5,239 14,93,587
TOTAL
18,35,476
20,54,917
10,75,532 3,393
Particulars
As of 31st March, 2014
As of 31st March, 2018
As of 31st March, 2017
EQUITY AND LIABILITIES Shareholders' Funds
Share Capital Reserves and Surplus
P o r o 11,360 -2,34,137 -2,22,777
11,360 -7,35,560 -7,24,200
11,360 -6,58,947 -6,47,587
6,54,607 36,500 21,426 7,12,533
5,08,556 4,632 42,210 5,55,398
6,96,785 7,806 37,432 7,42,023
2,03,972 4,77,818
20,956 6,43,333
25,252 4,66,745
6,51,413 13,953 13,47,156
7,50,370 4,266 14,18,925
6,75,134 3,260 11,70,391
18,84,922
18,36,912
12,50,123
12,64,827
13,61,154 18,732 207
9,21,844 1,277 1942
9,60,946 2,550
3,58,854 1,950 2474
4,85,955 3,589 70930
10,78,925
13,80,093
9,25,063
9,63,496
3,63,278
5,60,474
1,87,239
1,87,239
--
--
--
--
Non-Current Investments
209
206
69617
1,64,121
69670
69,667
Other Non-Current Assets Long Term Loans and Advances
-
-
-
-
104660
91,979
1,06,374
1,08,766
3,44,950
3,09,839
7,170
9,213
2,93,822
2,96,211
4,14,567
4,73,960
1,81,500
1,70,859
85,014 1,31,154 92,563 -
85,842 1,35,770 57,429 -
92,702 1,37,448 2,06,860 -
80,376 1,20,922 1,14,541 -
48,110 1,27,935 1,36,044 2,17,667 1,72,891
49,876 1,33,362 1,53,754 1,95,887 -
1,53,998
99,572
1,08,282
83,617
2,698
615
4,62,729
3,78,613
5,45,292
3,99,456
7,05,345
5,33,494
18,35,476 20,54,917 The accompanying notes are an integral part of the Financial Statements
18,84,922
18,36,912
12,50,123
12,64,827
Non-Current Liabilities Long Term Borrowings Deferred Tax Liability (Net) Other Long Term Liabilities Long Term Provisions Current Liabilities Short Term Borrowings Trade Payables
ASSETS Non-Current Assets Fixed Assets Tangible Assets Intangible Assets Capital Work-In-Progress
Goodwill on Consolidation
Current Assets Inventories Trade Receivables Cash and Bank Balances Other Current Assets Assets held for sale Short Term Loans and Advances
-
o t N o
TOTAL
o py
-
Source: Company financial statements. Note: Numbers are given in INR lakhs in the company statements. Please insert a decimal before the last number in the figure to convert to millions: for example, 12,64,827 lakhs = 126,482.7 million.
Jet Airways: Tale of Their Takeoff and Crash Landing Lan ding | 19
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Exhibit 7 Consolidated Statement Statement of Profit and Loss for the Year Ended March 31 (2013, 2015, and 2018) For the Year Ended 31st arc ,
Particulars
For the Year
For the Year
For the Year
For the Year
For the Year
Ended 31st arc ,
Ended 31st arc ,
Ended 31st arc ,
Ended 31st arc ,
Ended 31st arc ,
Income
Revenue rom Operations Income me Ot er Inco
18,84,056 56,864 56, 864
16,70,322 36,382 36, 382
19,57,343 70,730
17,30,189 41,158
Tota Rev Revenue enue
19,40,920
17,06,704
20,28,073
17,71,347
8,04,942
7,77,634
6,68,626
1,70,333
1,77,457
2,24,300
1,49,351
1,49,620
2,04,094
1,52,599
1,20,499
1,95,892
92,935
94,462
76,250
1,19,429 5,38,801 5,38,80 1
1,00,579 4,47,761 4,47,76 1
88,406 6,76,026
20,28,390
18,68,012
-87,470
Expenses Airc Ai rcra ra t Fue Fue Expenses Emp p oy oyee ee Bene Bene it Em Expenses Selling and Distribution Expenses Aircraft Lease Rentals Depre preci ciat atio ion n an De Amortization Finance Cost Expenses es Ot er Expens Tota Expenses Expenses Losss e ore Los ore Exceptional Items and Tax Exceptiona Except iona Items (Net) Loss Before Tax Tax Expense Current Tax De er erre Tax MAT Cre it Reversa ortt Ex Exce cess ss Ta Taxx S or Provisions (net) for Earlier Years
21,55,235 1,48,852
23,95,837
23,04,087
6,95,325
5,47,378
2,99,535
2,89,001
2,82,632
2,53,105
1,81,111
2,31,621
2,27,800
87,505
62,057
67,090
99,716 6,45,213
84,286 8,17,143
85,109 6,86,372
21,33,594
20,65,945
24,72,599
21,55,855
-1,61,308
-1,05,521
-2,94,598
-76,762
-1,48,232
9,612
17,316
-75,850
-72,199
-
-
-77,858
-1,43,992
-1,81,371
-3,66,797
-76,762
-1,48,232
-3,363 2,062
-
-
-
-
-678
-
-12
-
-20
-
-
-
-
149
-5181
-
-
-
-
-
-
-77,980
-1,42,013
-1,81,371
-3,66,785
-76,613
-1,43,071
-90.32
-164.49
-159.66
-381.3
-67.57
-130.5
52 70
Ot er comprehensive
o t N
income Remeasurement of Defined Benefits Plans Income tax related to above-mentioned items
Loss Pro t or t e year Earnings Per Equity Share : (Face Value ` 10 per share) Basic an Di ute in `)
o
r P o 23,28,653 67,184
o py
o
7,17,542 1,89,959 1,44,829
the e Financial Statements The accompanying notes are an integral part of th Source: Company Financial Statements. Note: Figures given in INR lakhs in the company statements. Please insert a decimal before the last number in the figure to convert to millions: for example, 12,64,827 lakhs = 126,482.7 million.
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Exhibit 8 Consolidated Cash Flow Statement Statement for the Year Ended March 31 (2013, 2015, and 2018) For t e Yea For Yearr Ended 31st Marc Ma rc , 201 2013 3
For t e Yea For Yearr Ended 31st Marc Ma rc , 20 2012 12
For t e Yea For Yearr Ended 31st Marc Ma rc , 201 2015 5
For t e Yea For Yearr Ended 31st Marc Ma rc , 20 2014 14
-77,858
-1,43,992
-1,81,371
-3,66,797
92,935
94,462
76,250
-2,834
-1,384
-
-
-20,323
1,851
5,417
6,580
14,589
-33,424
-7,404
-12,331
575
318
14
-
-16
-90
Finance Cost Interest on Income Tax Refund In Inte terrest on on Ba Ban an Ot er Deposits Excess Provision No Longer Required Provision for Doubtful Debts No Longer Required Written Back
1,19,429 -901
1,00,579 -829
-5,956
Provision for Compensated Absences and Gratuity Exchange Difference on Translation (Net) Provis Prov isio ion n or Dou t u Debts Provision for Doubtful Deposit Ba De ts Wri ritt tte en O
Particulars Cash flow from Operating Activities: Nett Loss Ne Loss Pr Pro o it Be ore Tax A us ustm tmen entt or : Depre De preci ciat atio ion n an Amortization Mar e to Mar etDerivatives (Gain) Cont ri ut utiion Re Rece ceiv iva a e Contri from Lessors Pro Provisi vision on or Sto Stocc Obsolescence Profit on Sale of Fixed Assets (Net) Loss ss on on Scrap Scrappin ping g o Fi Fixe xe Lo Assets Pr Pro o it on Sa e o Investments / Dividend on Current Investments
Oper at ng Pr Pro o t Be or ore e Operat Working Capital Changes
For t e Yea For Yearr Ended 31st Marc Ma rc , 201 2017 7
r P o -76,762
1,48,232
87,575
62,057
67,090
-
-210
-454
-
-
-
9.939
-
-
-9,166
7,818
-47,814
620
-
-
-37
-345
-878
88,406 -7
99,716 -1214
84,286 -618
85,109 -1726
-4,190
-8608
-763
-6203
-9172
-7,388
-5,849
-
-
-3,769
-31,892
-512
-113
-1971
-8726
-
-
3,523
2,049
3,288
2,912
4421
10,827
4,211
4,391
3,921
-
7,768
-24,026
4,600
1,219
2,256
1,283
1,879
264
319
-
-
11,643
4,916
-3940
137
111
65
67
33
81
13 1,311
13 2,822
12 2,073
12 1,608
884
312
-
-
75,850 26,248 -
72,199 -
-30,449 408 -655 418
-31,155 412 -513 92
-
-
-
-
-
1,255
-11,403
-32,903
149
-5,181
44,623
1,24,020
o t N o
Provision Wealth Tax Invento ntory ry for Scrappe Scr appe uring urin g Inve the year Exceptiona Items Recognition upon fulfilment of commitment Amortisation o Lease Rent Guarantee Commission Discounting o Provisions Provision or iminution in value of investment in Subsidiary Pro eve e op opme ment nt o Pro it on ev leasehold land Acturia gain/(loss) on remeasurement of defined benefit obligation
For t e Yea For Yearr Ended 31st Marc Ma rc , 201 2018 8
1,03,597
o py
28,444
34,247
o
-1,06,129
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A us ustm tmen entt or : Inventories Tr Tra a e Re Rece ceiv iva a es Loans ans an A van vance cess Lo Tr Tra a e Pa Paya ya es Cas Gene nera rate te ro rom m Cas Ge Operations Di Dire rect ct Ta Taxe xess Pa Paii
Refund (net) Net cash from Operating Activities Ca Cass F ow ro rom m In Inve vest st ng Activities: Purc Pu rc as ase e o Fi Fixe xe As Asse sets ts (Including Capital Work-inProgress) Purc ase e o Cu Curr rren entt Purc as Investments Purc Non-C n-Curr urren entt Purc ase o No Investments Sa e o Cu Curre rrent nt Investments C an ange gess in Fix Fixe e De Depo posi sits ts with Banks Inter eres estt Rec Recei eive ve on Ba Ban n Int and Other Deposits Proc oce ee s ro rom m Sa e o Pr Fixed Assets Sa e o NonNon-Curr Current ent Investments Investment in Equity Shares of Associate/Subsidiary Net Cash Flow From / (Used in) Investing Activities Ca Cass F ow rom rom F na nanc nc ng Activities Net Decre Decrease ase Increa Increase se in Short Term Loans Procee Long g Ter Term m Procee s rom Lon Loans during the year Repayment o Long Term Repayment Term Loans during the year Finance Cost
-5,900 -1,4 -1 ,453 53 -46,4 -4 6,480 80 1,41 1, 41,1 ,180 80
-12,725 -33, -3 3,743 743 4,81 4, 810 0 2,19, 2,1 9,45 454 4
-28,988 -17,642 -76,676 1,42,701
-13,256 -4,791 -11,574 2,33,492
882 5,689 -88,960 2,05,692
-7,818 8,937 28,876 -66,279
1,90,944
2,06,240
53,642
97,742
1,67,926
87,736
-2,926
23,078
-839
-5,616
1,838
1,88,018
2,29,318
52,803
92,126
-20,773
-6,607
-1,71,046
-
-19,000
-1,88,995
-3
-
-
-
27,018
1,89,085
-26,378
2,866
-26,321
4,583
3,712
10,190
-
Net Cas use or Financing Activities
Increase ase Decre Decrease ase Net Incre in Cash and Cash Equivalents Cas an Cas Equiva ents at the beginning of the year (Refer note 1 below) Cas an Cas Equiva ents at end of the year (Refer note 1 below)
r P o 1,69,764
96,085
-40,041
-89,091
-22,932
-1,10,000
-13,20,300
-32,05,521
-
-
-
1,10,037
13,74,045
32,03,065
-13,869
-8,978
20,035
6,098
6,902
13,105
o
-
1,69,838 4
83,138 1
1,510 -
1,56,783 2
-
-
-69,521
--3 3
-50
1,67,333
30,961
-17,245
-34,157
-35,915
1,64,487
-12,635
441
1,60,457
8,713
-4,296
-2,76,854
58,903
50,000
1,53,599
1,71,914
1,25,000
3,55,867
-2,87,092 -1,07,138
-2,19,179 -99,446
-1,92,331 -91,246
-3,28,270 -1,00,506
-1,93,157 -83,043
-2,32,519 -84,352
-3 -
-
-3 -
-6 2,05,562
-
-
-3,47,965
-2,68,184
30,476
42,663
-1,55,496
2,37,858
7,386
-7,905
66,034
15,306
-21,647
22,714
7,151
15,056
29,518
14,212
53,697
30,983
14,537
7,151
95,552
29,518
32,050
53,697
-
o t N o
Unc aime from Divi Issue en P Proceeds ofai Shares (Net of Share issue expense)
o py
8,349
Source: Company financial statements. Note: Figures are given in INR lakhs in the company statements. Please insert a decimal before the last number in the figure to convert to millions: for example, 12,64,827 lakhs = 126,482.7 million.
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Exhibit 9 Jet Airways Share Price (January 2019 –May 2019)
Date – In 2019
Opening Price
High
Closing Price
Low
January 1
280
284
276
281
January 8
246
248
January 15
298
314
January 22
273
279
January 29
245
251
February 4
255
256
February 11
226
227
February 18
239
246
February 25
230
233
March 5
224
243
March 12
253
255
March 19
235
237
March 26
263
279
P o r o
April 1
268
April 8
242
245
288
294
268
272
237
243
241
243
212
214
230
232
225
229
224
239
234
245
223
229
262
271
271
262
266
256
270
251
264
April 18
216
216
159
165
April 22
152
168
127
155
April 30
163
163
145
153
May 3
125
139
125
136
May 10
150
158
145
152
May 21
135
155
131
151
May 23
160
164
154
155
May 31
151
152
144
146
o py
Source: IIFL (India Info Line) Database (in INR). Note: Share price is rounded off to the nearest whole number.
o t N o
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Exhibit 10 Jet Airlines’ Bank Debt (Domestic) ( Domestic) Sl. Status Ban k* Bank* Debt Amount (in INR million) No. 1 Domestic SBI 19,580 2 Domestic Punjab National Bank 17,460 3 Domestic YES Bank 8,690 4 Domestic IDBI 7,520 5 Domestic Canara Bank 7,180 6 Domestic ICICI Bank 5,450 7 Domestic Bank of India 2,660 8 Domestic Indian Overseas Bank 2,120 9 Domestic Syndicate Bank 1,850 10 International Mashreq Bank and HSBC 21,000 *Jet Airways took smaller loans from other banks not mentioned here. Only credit greater than INR 1,500 million is listed here.
P o r o
Source: List of creditors released by Jet Airways.
o t N o
o py
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