Saturday, June 22, 2019

Banks killed Jet Airways with kindness

Two months after India’s oldest private-sector airline grounded its last plane, and with even a water-bottling firm threatening to drag the carrier into bankruptcy, a consortium of lenders led by State Bank of India can finally stop pretending that a white knight is coming.
With the insolvency tribunal taking Jet Airways India Ltd. under its wing on Thursday, there may be one more abortive attempt to sell it whole. But now that lessors have taken most of the fleet, employees have all but given up on back wages, and the country’s aviation market has moved on, liquidation is the most practical solution. Little will be recovered from financial and operational creditors’ claims, which may add up to more than 140 billion rupees ($2 billion), according to local media reports. Jet, as Monty Python might have observed, isn’t exactly a Norwegian blue, pining for the fjords. It’s a dead parrot. Banks killed it with kindness.
If only they had seen that founder Naresh Goyal wasn’t able to cover costs, and was using borrowed money to keep the full-service airline afloat amid intense competition with low-cost rivals. One refusal from them to lend more without fresh equity from 51% owner Goyal, his 24% partner Etihad Airways PJSC, or the public, would have hastened the default that finally occurred in January. Even then, creditors could have produced a new controlling shareholder in an out-of-court process if they’d wrested control of the board from Goyal rather than waiting until late March. The airline could still have survived even if that had failed, with banks supplying working capital through an in-court bankruptcy process.
22/06/19 Andy Mukherjee/Print

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