Did lenders destroy the value of Jet Airways?

It’s pretty much the end of the road for Jet Airways. Its lenders have decided to seek a resolution under the Insolvency and Bankruptcy Code (IBC), after failing to find a suitable buyer. Jet Airways, which ceased operations in mid-April, was once India’s biggest private carrier and still continues to enjoy considerable brand equity among corporate travellers.

The lenders are expected to file insolvency proceedings against the airline in the National Company Law Tribunal over the next couple of days. The news resulted in the airline’s share price tanking as much as 50% in Tuesday’s trading session, hitting an all-time low of ₹32.25. At the end of the day, the company’s shares closed at ₹40.45 apiece on the BSE, down 40.78% over the previous day’s close.

“I would think that this is the end of the road for Jet Airways. Because there is no value per se in the company. What is left of it? Literally nothing much,” says Shriram Subramanian, managing director, InGovern, a Bengaluru-based independent corporate governance research and advisory firm.

In March, a consortium of banks, led by State Bank of India, took control of Jet Airways with hopes of reviving its fortune. At the time, former finance minister Arun Jaitely had hailed the decision. “They have kept public interest in mind because India needs more airlines and more aircraft considering the flying population,” Jaitely was quoted as saying in an article in The Economic Times.

On the contrary, ever since the banking consortium stepped in the airline has been on a downward spiral — first with lessors repossessing aircraft and eventually the airline ceased operations. “What baffles is how can a bank [SBI] that owns an airline sit pretty and have its fleet be taken over from under your very nose by lessors, and not take steps to retain the fleet?” Mark D Martin, founder and CEO, Martin Consulting had told Fortune India in an earlier interview.

Besides, the airlines C-suite executives quit as did some of its employees. About 285 Jet Airways pilots have already joined IndiGo, India’s biggest airline, with the number only expected to increase. More importantly, the slots of Jet Airways at various airports were, and are being, given to other airlines on a temporary basis. “The banks have done a shoddy job,” says Subramanian.

“Did they manage the sale process efficiently? No, they didn’t do it in a structured manner and as fast as it could have been done,” adds Subramanian. However, there were external complications in the days after the lenders had taken control of the airline. As Subramanian says, “We don’t know whether there was any interference by the government due to the general elections that took place.”

“Jet Airways could not figure it out, fine. But let’s not forget the banks are responsible for the destruction of value in the past two months. They moved around like headless chickens rather than bring aviation experts to turn it around,” tweeted Ajay Awtaney, founder editor, LiveFromALounge.com.