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  • Writer's pictureRFMLR RGNUL


This piece has been authored by Vatsal Srivastava, a second year B.A.LL.B (Hons.) student at the Rajiv Gandhi National University of Law, Patiala and Yash Srivastava, a second year B.B.A.LL.B (Hons.) student at Symbiosis Law School, Noida.

An over-ambitious entrepreneur-turned-chairman, lack of external aid, decreasing faith and interest of the investors or just a terrible timeline; what could be a reason behind the fall of Jet Airways, once a king of the aviation industry, which has now reduced to a near-to-bankrupt company that had to cease operations after 25 years?

Jet Airways, which came into being on May 5, 1993 could not manage to give its flyers the joy of flying, as preached by them through their slogan, after April 17, 2019. The company after twenty five years of operations under different names, collaborations, agreements and understandings, had to bring its operations to halt and finally cease them.

The Journey at a glance

To begin with, within three years of its inception in 1993, Jet Airways grew to capture a market-share of 20 percent by 1996, only after Indian Airlines, owned by the state. The airline company that had been running successfully since the beginning suffered losses for the first time in the financial year 2001-02. Jet Airways commenced international flights, primarily in Sri Lanka, Bangladesh and Nepal from 2004, restricted to South Asia. It signed and declined important deals and offers, including that of Air Sahara and Embraer 175. Jet Airways got listed on the Bombay Stock Exchange when its stakeholders decided to make it a public company and raised Rs. 18.9 billion through Initial Public Offering (IPO) within three months. The cumulative growth of the company from antiquity to the legacy could be attributed to the cynosure of the entreprise, Mr. Naresh Goyal, but after April, 2019, this fact cannot help but only serve as a silver lining of a dark, raining cloud.

Probable Causes of the fall

The last few years have witnessed the gradual downfall of Kingfisher Airlines. On a similar path, Jet Airways, which has been the country’s pride for more than two decades is threatened by an imminent collapse.

Firstly, the airline company started climbing the merger mountain by expressing its interest in buying Air Sahara for US$ 500 million in 2006 and eventually buying it for US$ 210 million in April 2007.[i] This fragment of the airline was named JetLite, a low-cost carrier to garner the middle-class customer base. Post this transformation in the fleet and company-structure, which cost the airline quite a hefty amount, it introduced another subsidiary by the name Jet Konnect under the same low-cost model segment. In the highly competitive aviation sector, cost-cutting is the prime concern. Jet Airways struggled to compete with successful and cheaper Airlines like Indigo, SpiceJet and Go Air. The trio of Indigo, SpiceJet and GoAir outperformed Jet Airways as they focused on offering cut-prices and unserved routes while Jet Airways remained confined to cater the corporate and elite traffic. Thus, the large chunk of price sensitive consumers preferred the ‘real’ low cost carriers.

Secondly, yet another disputable reason of the decline could be the dictator-like approach of Mr. Naresh Goyal. An autocratic attitude of Mr. Goyal in decision making has led to the crisis. For instance, a few senior officials at the company advised him not to buy Boeing 777s, which turned out to be a bad choice, and even worse when they could not be operated in a profitable manner, thereby increasing the operational cost of the company.

Thirdly, the company kept ignoring the ever-increasing debt and could not handle it when it grew bigger than manageable. While it did not separately disclose cash and cash equivalents as of December 31, Bloomberg calculations show the airline had about Rs. 3.55 billion of cash at the end of last year. It defaulted on loans that were due by December 31 and has delayed payments to staff and lessors.[ii]

Lastly, the airline company by its increasing debt, kept losing its investors’ confidence and trust. Despite a visible but gradual decline in the value of its shares, the company’s directors did not budge and were not open to negotiation when some deals were on the table. Delta Airlines, a U.S. based airline company offered to buy shares of Jet Airways at a price that was not accepted by the latter.[iii] At this moment of a crisis-like situation, when Indian investors offered help, Jet Airways decided to join hands with Abu Dhabi’s Etihad Airways, thus losing the confidence of its investors, both existing and prospective. Managerial Inefficiencies and Incompetence along with failure to attract strategic investment to provide financial support culminated into the shutdown of Jet Airways.

Latest developments

Last when Jet Airways was in the market, a majority of its share (51%) was held by a consortium led by State Bank of India, thus making it the largest stakeholder in the company. Second in the place was Mr. Naresh Goyal with 24% of Jet Airways, followed by Etihad Group, which held 12% shares and 13% shares, which were put up as IPO, were public shares. The first half of 2019 saw senior officials like CEO Vinay Dube and CFO Amit Agarwal resigning from their posts. Over the years after 2009, when Jet Airways almost laid off 1900 employees to cut down on cost arising out of human resource, the company faced incessant piling up of credit through loans, unpaid salaries and operational credit, which finally reached a point where the company was deep into losses and had a little chance to recover, only when a new stakeholder would introduce reforms.

For this, when the airline was on the brink of bankruptcy, a few big names like the Hinduja Group, Etihad Airlines and Tata Group along with a few private investors came up for its revival. However, the speculation was short-lived and it could not reach a viable conclusion through the bidding process.

Eventually on June 18, 2019, the consortium led by SBI filed a plea under Section 7 of the Insolvency and Bankruptcy Code (IBC) in the National Company Law Tribunal (Mumbai) and for getting the most out of the almost insolvent company. The Tribunal, on June 20, accepted the plea and initiated the resolution process, wherein Cyril Amarchand Mangaldas appeared for SBI. The Mumbai bench was presided over by judges VP Singh and Ravikumar Duraisamy. Taking into account the high national stakes involved in the Jet crisis, NCLT has suggested the completion of insolvency proceedings within 90 days instead of the usual 180 days, besides mandatory fortnightly progress reports. As a matter of fact, the shares of Jet Airways skyrocketed to 122.21 percent ahead of NCLT’s acceptance of the said plea.[iv]

What lies Ahead

A demand and supply imbalance of airplanes is set to raise prices of flights. The complementary area of Jet Airways was metro cities which will be impacted both in terms of service, quality, and fare rise. Airlines like SpiceJet, Go Air, Vistara, Air Asia are likely to benefit with this disruption having a sound financial backing. International air traffic may shift to foreign Airlines as the present Indian service providers like may be unable to provide necessary and adequate machinery. Creditors like Etihad have minor stakes involved, However SBI, the largest creditor has approached the NCLT for insolvency resolution.

The alarming effect of imminent job losses of 23,000 employees will impact thousands of households including the dependents of the bread-earners. The crisis poses a challenge for the government’s ambitious initiatives like UDAN (Ude Desh ka Aam Nagrik). The crucial economic stakes involved in terms of time and money at both micro and macro level has made the Jet crisis an alarming situation that jeopardizes the growth prospects of India. The development of our nation requires transport and communication connectivity of the core to the periphery at both National and International scale. Hence, requisite measures need to be immediately adopted to rescue the stakeholders and propel the growth engine.

[i] Chris Noon, Goyal’s Jet Airways Buys Air Sahara, Forbes (Jan. 19, 2006),

[ii] --, Why Jet Airways is selling a majority stake for Re 1, livemint (Feb. 19, 2019),

[iii] Aneesh Phadnis, ‘Guilty and embarrassed’: Jet Airways boss sorry for share price erosion, Business Standard (Aug. 10, 2018),

[iv] --, Unprecedented rally in Jet Airways shares; zoom over 122%, Business Line (Jun. 20, 2019),


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