Fractured/Earth

As the first part of this series reported, the bankruptcy resolution of Jet Airways is not going well.

Not only has the process seen established players in the aviation sector back out early, with a bunch of unknown entities trying to bag India’s best-run airline instead, it has also yielded an outcome where a businessman with links to the infamous Gupta brothers of South Africa has won the airline.

That is just the start. The winning consortium paid just Rs 475 crore for the airline, despite its outstanding claims standing at Rs 24,888 crore. Of this small amount, most went to banks with operational creditors and employees taking large cuts.

The result? The two years since the Consortium bagged Jet Airways have been characterised by stasis, with banks, employee associations and the new management locked in court battles. In all, Jet 2.0 has missed multiple deadlines to resume operations (see this, this, this and this).

The question writes itself: Why is Jet, India’s best airline at one time, unable to regain the skies?

As this first part of this report said, answers to that question extend beyond the blame-game underway between Jet’s ex-employees, banks and the Jalan-Kalrock Consortium. Take a closer look at its bankruptcy saga and you will see larger deficiencies haunting India’s Insolvency and Bankruptcy Code.

Read the whole report here.
I have been writing — intermittently — on India’s bad loan proceedings. The very first report spoke about how these were dramatically changing ownership patterns over India Inc, with a small set of indian and global firms/funds bagging most of these companies. The consequences ran deep. As a few players amassed scale in sectors like steel and power, smaller companies in states like Chhattisgarh were forced to consider diversification beyond their core sectors. They could no longer compete. In tandem, with stranded assets being picked up for a song, other industry players struggled to compete with them as well. One outcome? A drop in fresh investment in these sectors.
In all this, the role of the government stayed suspect. It pushed — given its design for IBC — a clutch of firms into bankruptcy courts instead of creating bespoke solutions to revive them (a la Satyam). At the same time, it selectively extricated some firms from bankruptcy courts. Also see this report on that front. All this, as things stand, fits into a large frame of how state-capital relations are changing in India.
Jet has fallen to this larger frame — as much as to its mismanagement.