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The news of Jet Airways' liquidation sent shockwaves through the Indian aviation industry, with the airline's stock plummeting by 5% on Friday. The Supreme Court's order, stemming from an appeal by creditors led by State Bank of India (SBI), marked a definitive end to the troubled carrier's journey. This decision has far-reaching implications, not just for Jet Airways but also for the broader airline financing landscape.
The liquidation process will see the proceeds distributed to creditors and employees, effectively eroding the value of Jet Airways stock. While the judgment came as a result of creditor pressure, SBI's chairman, Challa Sreenivasulu Setty, declined to comment on the recovery expected from the liquidation process. Notably, he also stated that SBI will not be funding any airlines in the future, reflecting a cautious approach towards the airline sector.
This decision by SBI signifies a shift in the bank's stance towards airline financing. It underscores the inherent risks associated with lending to airlines, particularly in the context of Jet Airways' demise. The liquidation process will involve the sale of Jet Airways' assets, including 11 grounded aircraft, commercial space in Mumbai, and other valuable holdings. The proceeds from these sales will be used to settle the outstanding debts owed to creditors.
The implications of this liquidation extend beyond Jet Airways. It serves as a stark reminder of the vulnerabilities of the airline industry, characterized by its dependence on volatile factors such as fuel prices, competition, and global economic trends. For other airlines seeking funding, the reluctance of major lenders like SBI could create a challenging environment. This development could lead to increased scrutiny of airline business models, stricter lending criteria, and a greater emphasis on financial stability and risk management practices.
Source: Jet Airways stock falls 5%, SBI to stay away from funding airlines