Jet Airways insolvency: A look at torturous negotiations, threats, claims that led to resolution

Five days after Ashish Chhawchharia took over as the resolution professional of Jet Airways in June 2019, he found himself and the airline’s employees locked out of its office by the property's owners due to non-payment of dues.When he got in, he found the IT access, including that to the airline’s digitally maintained accounts, cut off as the service provider hadn’t been paid.It took three months of initial legal negotiations for Chhawchharia and his 40-member team to get into and steer what would be a long, gruelling insolvency process of India’s oldest surviving private airline.Sixteen months after its case was admitted by India’s bankruptcy court, Jet’s committee of creditors last Saturday approved a revival plan submitted by a consortium of businessman Murari Lal Jalan and London’s Kalrock Capital."We were blind when we went in," Chhawchharia, head of restructuring services and a 10-year veteran at Grant Thornton told ET in a recent interview.There was almost no one from the airline to bring him up to speed. Almost the entire senior management including its CEO and heads of finance, HR and commercial operations as well its directors had left weeks running into its insolvency. Two key people who helped were Rajesh Prasad, a banking veteran who had joined the beleaguered carrier as its head of strategy in its last year of operations and Gautam Acharya, the airline's vice president for legal and regulatory affairs. Chhawchharia also created an asset preservation team composed of people from various departments including engineers to maintain the aircraft.Jet, once the ruler of Indian skies, was run to the ground because of acute competition from low fare carriers, a high cost structure, various legacy issues and a convoluted product offering. And this, despite a partnership with the mighty Gulf carrier Etihad Airways. Jet stopped operations on April 17 2019 and was admitted by the National Company Law Tribunal (NCLT) on June 20 that year.When Chhawchharia and his team got to it, Jet had almost no planes and its flight slots were being reallocated by the government to other airlines. Insurance payments and lease rentals were overdue on aircraft still in its fleet. There was no money. Only creditors: banks, lessors, suppliers, vendors, other airlines, employees.Besides, a messy tangled cobweb of millions of customers and thousands of travel agents seeking payments and refunds."No other insolvency case has received such a mind boggling number of retail claims," said Chhawchharia.His team was sent the details of 600,000 ticket holders to sift from. Of the 40 people in his team, 12 racked their brains for months just over customer claims, he said.Most customers will never get their money back.The biggest challenge for Chhawchharia was to convince stakeholders there was still some worth to Jet."People asked us what is there in the company. Where are the aircraft? Where are the slots? Bidders wanted assurance from the ministry in getting slots," while the ministry kept asking for a concrete business plan to revive the airline, he said."It was a chicken and egg situation,"In all there were claims worth more than ₹ 40,000 crore submitted to the RP. Of that, he admitted ₹ 15,432 crore, including ₹7,454 crore from financial lenders, ₹ 6,658 crore from operational creditors and over ₹ 1,200 crore employees and their representatives.Like customers, most of Jet’s creditors and its employees too won't get their money back.Several corporates including Anil Agarwal, chairman of Vedanta Resources, and South American conglomerate Synergy Group, threw their hats in the ring but stopped short of submitting concrete proposals.And then the Covid-19 struck. The pandemic annihilated aviation business across the world, grounding airlines and pushing many to bankruptcy. Lobbying body International Air Transport Association (IATA) estimates global carriers to lose over $84 billion this year. Some Indian carriers too have been fighting for survival. Everyone wrote Jet off and said anything but a quick liquidation would be pointless.Chhawchharia didn’t give up. He saw an advantage in the pandemic: "a leveller" for the aviation industry."All aviation companies were grounded. We got more time due to Covid-19. I saw in it an opportunity for one more attempt," he said.The last big challenge was getting the financial lenders on board.Apart from the Indian banks, there were 8-10 lenders outside India, said Chhawchharia."We made it a point that we should get them their best possible deals even if they are involved as small lenders. There were three sets of teams working for different groups of lenders," he said. He worked on the biggest ones, including State Bank of India, which represented a quarter of the committee of creditors by voting share. "SBI played an anchor role in the resolution process supported by the chairman himself. Other large lenders like Punjab National Bank, Yes Bank and IDBI were all in favour of a revival rather than liquidation" Chhawchharia said in terms of net worth, both Kalrock and Jalan, individually too, were eligible to invest in Jet. Jalan is a UAE and Tashkent-based businessman specialising in real estate and hospitality.

from Economic Times https://ift.tt/34py15u
via IFTTT