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Tuesday, Nov 19, 2019

Jet is case of throwing good money after bad

The insolvency and bankruptcy code may be the answer to the airline’s crisis

editorials Updated: Apr 18, 2019 20:01 IST

Hindustan Times
Jet Airways, which turned 25 last year, has been, for at least a decade now, unrecognisable from the one that delighted Indians with its service standards in the 1990s and the early 2000s
Jet Airways, which turned 25 last year, has been, for at least a decade now, unrecognisable from the one that delighted Indians with its service standards in the 1990s and the early 2000s(Abhijit Bhatlekar/Mint)
         

A wave of sentimental nostalgia greeted the news of Jet Airways’ temporary grounding after banks (which now effectively own it) preferred to wait for its sale instead of pumping in more money.

In truth, the airline, which turned 25 last year, has been, for at least a decade, unrecognisable from the one that delighted Indians with its service standards in the 1990s and the early 2000s. Indeed, until it hit an air pocket of its own, rival IndiGo’s service quality was better, and usually cost less.

That there are bidders for the airline, including a foreign airline which is already a significant shareholder (Etihad), and a private equity firm (TPG), is heartening, especially because, with Rs 8500 crore of debt that needs to be paid off, and more money needed to run the airline, Jet isn’t exactly an attractive purchase. As with many airlines, competition, fuel costs, and unfavourable foreign exchange equations have wreaked havoc on Jet. And, as with many Indian companies, ambition and mismanagement have played a part too.

The banks are now in charge, and Naresh Goyal, the man who founded the airline, is out of the picture, after sensibly having withdrawn his own bid for the airline.

A sale (as long as it isn’t a distress one) could help banks recover most of the money Jet owes them, and will, hopefully, protect the jobs of thousands of employees who have served Jet well over the years. The buyer will have to invest a significant amount of money and also be patient in terms of returns, but Jet does have a brand.

If that doesn’t happen, Jet will probably become a case for the National Company Law Tribunal under the Insolvency and Bankruptcy Code (IBC). This newspaper has already argued that the banks should not have taken control, that the government should not have encouraged them to do so, and that IBC should have been the preferred avenue for resolution once it was clear that even the slightest chance of the airline’s revival involved throwing good money after bad.

It may come to that in the end.