Jet Airways Creditors Set to Recoup Just 5% of Monies Owed

(Bloomberg) -- Lenders to Jet Airways India Ltd. only stand to receive about 5% of what they're owed, another blow to banks in the nation that are growing increasingly accustomed to paltry recoveries.

The new owners of Jet Airways -- Dubai-based businessman Murari Lal Jalan and Kalrock Capital Management Ltd. in London -- have proposed paying 3.8 billion rupees ($51 million) of the 78.1 billion rupees they owe to financial creditors, according to a bankruptcy tribunal order tabled late Wednesday.

Some 1.9 billion rupees will be paid upfront within six months while the rest will come from the proceeds of issuing zero-coupon bonds. The new owners have also offered the lenders a 9.5% stake in Jet Airways and a 7.5% interest in Jet Privilege, the carrier's loyalty and rewards management company.

India has one of the worst bad-debt ratios in the world and falling creditors' recovery rates offer no respite to the nation's financial system. Recoveries for financiers from resolved insolvency cases dropped to 39% of dues as of March from 46% a year earlier, Macquarie Capital data show. If the top nine cases by recovery are excluded, lenders received just 24% of dues.

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Jet Airways was India's biggest private carrier before it went belly up in 2019 under mounting debts. Even before Covid-19 destroyed demand for air travel, crushing fare wars and high costs made it difficult for many airlines to survive in India. Kingfisher Airlines Ltd., once the country's second-largest domestic carrier, collapsed in 2012, and flag carrier Air India Ltd. is saddled with debt and has been searching for a buyer for years.

Even though Jet Airways is closer to flying again now that its rescue plan has been approved, there are many challenges ahead for the grounded carrier. Jet Airways was planning to operate all its historic domestic slots, which went to other airlines in the time it wasn't flying, but the bankruptcy court didn't agree to restore them.

“The allotment of slots and their usage is like a constantly changing jigsaw puzzle,” the order said. “A single slot therefore could not be left or kept idle. Besides, other airlines have utilized those slots for all these years. Depriving them of the slots which they are still utilizing/operating would be prejudicial” considering Jet Airways is yet to resume operations and “prove its worth in operating an airline.”