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JET AIRWAYS – HOPES FOR REVIVAL

The continuous defaulting of the India's distinguished airlines one after the other is ailing the
Indian Aviation Industry. After Kingfisher Airlines, it is now the Jet Airways that has been
under severe crisis and as a result even the lenders have lost their hope of its revival and
chooses to refer Jet Airways to National Company law Tribunal (NCLT) and seek resolution
under Indian Bankruptcy Code.

Jet Airways had taken Rs 8500 crore debt for expansion purposes from its lenders SBI, PNB
bank that the Jet airlines defaulted upon. Jet Airways made the request for emergency
funding of Rs 400 crore from the banks but the banks rejected , so it was unable to pay for
the fuel and other services, consequently it had to ground its planes at least temporarily. The
Jet Airways management had also asked the government to release Rs.175 crore to pay off 1
month salary to its staff but the government also rejected the request.

Jet wanted to keep their Boeing 777 planes as collateral. But since the Jet Airways had
defaulted on a loan of Exim bank through which the aircrafts were purchased therefore the
Indian banks were unable to treat the planes as collateral.

Jet Airways have suspended all their domestic and international flight operations. Jet Airways
is a borrower from 26 lenders as on 2017-18. The lenders exposure towards the Jet Airways
has been Rs 8400 Crore. It owes another Rs.10000 crore to operational creditors and Rs 4000
crore in salaries and statutory dues so the total liabilities of Jet Airlines amount to Rs 14000
Crore. It has 16558 permanent staff as on March 2018, 1600 pilots and 123 planes grounded.
As a result Jet's share price has fallen sharply by 82% in the last 1 year.

Jet airways is a budget carrier which had no frills, all timely scheduled flights and dropped
their fares below cost, amidst the slew of budget carriers. The jet fuel added up the expenses
and it was left with just $3.55bn cash in Dec last year. This was barely enough cash to pay and
they defaulted on loans and dues were left unpaid to the staff and lessors.

The collapse of India's second largest Airline due to some factors that plunged the Indian
Aviation Industry and bore the brunt. One, there is reckless competition in the market as the
fuel prices are sky rocketing and yields are low. There are always wafer thin margins in the
airline industry due to other airlines attracting more customers with better deals and
packages, better services. Jet Airways could not attract more customers may be because of
not attractive services or deals. Second, there is a very high cost of Aviation turbine Fuel (ATF)
in India at least 35% -40% higher compared to other countries. Third, Jet Airways has domestic
flights 39% compared to Indigo 85%. Jet has International flights 61% compared to Indigo
having just 15%. Under UDAAN scheme of the Government, airline companies get a
prerogative to fly domestically under UDAAN routes and get their respective concessions in
Aviation Turbine Fuel costs and taxes. Since Jet Airways had less domestic flights compared
to Indigo and others, Jet could not get the concessions of flying under UDAAN routes.
Hence, these factors barely left enough cash reserves to sustain the operations for few weeks.
Gradually it became a cash strapped company and were unable to bear their operational
expenses. And they started to default in large numbers, made heavy losses and landed into
financial distress.

Today, Indian Aviation industry is standing in a precarious situation since last few years. Such
distinguished and well established airlines are defaulting and falling into liquidation opening
doors for the restructuring process.

While the Jet Airways stock had a downward movement all the way from Rs 165 to Rs 28 in
April, 19 when the Jet halted its operations. During this time, the investors kept adding their
short positions. However with Jet being referred to NCLT, recently, the investors are reducing
the positions in a hope of some signal of recovery.

Air India is close to defaulting soon after Jet Airways.