Synopsis: The case was about an oldest and the pioneer private airline in India that had eaten into the monopoly of the Indian national aircraft carrier and has redefined India’s flying experience – the Jet Airways! The case primarily attempted to highlight how a misalignment of strategic, operational, and financial performance of a firm could propel a deep financial trouble eventually leading to an insolvency position for a top-performing private airline in India.
The story of Jet Airways’ turbulent journey has been narrated through the concerns experienced by the finance control manager of Jet Airways, K Subramanian. Being associated with the company for over 26 years, he was was apprehensive about the prospects of the jet’s relaunch programme in 2022, as the relaunch was mired around the insolvency case filings and bankruptcy proceedings and worsening country’s economic prospects emanating from the COVID uncertainties. Subramanian deepest concern was related to the valuation of assets of a distressed airline company as the airline has lost some of its strategic assets and faced depreciation due to two -years of grounded operational flights. If the assets were valued considering the firm as a going-concern, it must also aim at long term sustainability prospects of the airlines to best settle the interest of claimants, thereby allowing the consortium of lenders an incentive to push for a resolution process.
He, therefore, asked the research analyst team headed by Digny David to probe into the changing dynamics of Jet’s operations from the years of glory to insolvency proceedings to its re-launch programme. Digny was asked to present a report considering the state of Indian Aviation Industry, the Jet’s distress balloon, its strategic and operational fiasco, the macro-economic dynamics, the concerns related to valuation of distressed airline company, and its scope of a successful re-launch programme.
The case provides a unique setting for understanding the India’s civil aviation industry, its competitive rivalry, the Indian Insolvency and Bankruptcy Code (IBC) proceedings and key concerns related to IBC that was distinctive to the Airlines and proceeds to delve into the valuation concerns of distressed firm. After going through the case and assignment questions, the target participants can achieve the following objectives:
• Understand the current state of Indian Aviation Sector.
• Identify the macroeconomic challenges that hinder the smooth operations of the airline.
• Conduct a SWOT and STEEP analysis for better operational and managerial decision making.
• Understand the Indian IBC proceedings and grey areas that still needs to be addressed for swift resolution of any insolvency petitions.
• Understand the key financial ratios concerning the firm’s leverage, liquidity, profitability, and turnover aspects that enables to predict corporate defaults and financial distress periods.
• Perform enterprise valuation of distressed firm within depth screening of comparative financial statements.