Jet Airways Case Throws Lessons – Airlines and NCLT

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MUMBAI: The insolvency resolution process of Jet Airways, the first Indian carrier to attempt a revival after a transit halt in the bankruptcy court, has raised challenges that could lead to a better understanding of how the Insolvency and Bankruptcy Code (IBC) works when it comes to airlines, said experts tracking the matter.



 

Jet trade unions have challenged the National Company Law Tribunal (NCLT) approval of the Kalrock-Jalan consortium’s resolution plan in the appellate tribunal. Staffers’ employment prospects and their outstanding dues apart, the petitions lambasted the resolution process. The staff__ who received their last salary in March 2019, that is__were made to wait in hope for over two years to finally learn on June 30 that only 50 out of the 4000-odd employees will be absorbed in Jet 2.0. Throughout the resolution process, Jet’s then resolution professional (RP) addressed the employees as a valuable asset of Jet, the petition said. A January 8 NCLT order too deemed them assets `

Who are extremely conversant with the procedure of running the airline… and so should be protected by properly taking care of their needs”. However in the end “the RP treated them as workforce with outdated knowledge, burdensome and therefore required to be thrown out of the services’’, the union petition said.
Sudip Mahapatra, partner of S&R Associates, a law firm said: Jet Airways resolution process began over two years ago in mid-2019.
That’s a long time to keep thousands of employees on tenterhooks about their employment. In any IBC case that involves companies with a lot of employees, fast-tracking the process would mean clarity on their job prospects early on in the process”.
Also, unlike cement or steel companies, airlines aren’t bestowed with a shelf life long enough to survive a couple of years in the insolvency resolution process.
Airline consumers react to insolvency, people stop booking air tickets. If the airline has suspended operations, like in the case of Jet Airways, then the airport slots, the key asset for an airline, aren’t protected. IBC is a long process involving a year or two. Whether airline bankruptcies should be handled through a separate fast track process under IBC is the question. In an ideal world, a pre-packaged insolvency process that is completed in 60-90 days to allow the new owners to take over or restart operations would be better suited for the airline business,” he added.
Dr D Dhanuraj, chairman of Centre for Public Policy Research, a non-profit think-tank with interests in the current economic, social and political issue said: “Under the Indian labour laws, a company has statutory obligation to pay its staffers dues like Provident Fund, gratuity. In the event of the collapse of a company, what is the mechanism for payment of these statutory dues? These aspects aren’t clearly spelt out, especially with bankruptcy court coming into the picture. My reading is that cases that involve an interplay between labour laws and IBC, this isn’t clear, whether these statutory dues should be part of the NCLT proceedings or whether it’s a labour department problem?.”
Aviation expert Parvez Damania said that Jet’s positive equity has been entirely wiped out. “Except for licence, what is the value left,’’ he said referring to the airport slots. “How can the government hold on to the slots forever. If the slots are given away to other airlines, why would they give them back? I’m not confident in the whole Jet revival process.” Most of Jet’s aircraft have been repossessed by leasing companies and starting with a few aircraft left in India will be a very difficult and expensive task, he said

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