The move to revive the grounded Jet Airways may hit a roadblock over the employee payout as part of the revival plan. While the creditors had to take massive haircuts, the employees too will have to make do with a fraction of what is owed to them.
While employee claims of 12.65 billion rupees (US$ 169 million) were admitted, the new owners – UK-based Kalrock Capital consortium and a UAE-based Indian-origin businessman Murari Lal Jalan, have set aside only 520 million rupees ($6.98 million) for the purpose. The airline owes its employees anywhere between 300,000 rupees and 8.5 million rupees, depending on their designations and years of service, but an employee may get only 23,000 rupees.
As per the resolution plan formulated by the National Company Law Tribunal, 95% of Jet employees should accept the settlement and the airline promoters have three months to persuade them. But with the proposed payment being a huge letdown, it remains unlikely. If 95% of staff do not vote in favor of the proposal it will automatically lapse.
The employees have reached out to the labor ministry, civil aviation ministry, and labor commissioners in this regard, The Hindu Business Line reports. The All India Jet Airways’ Officers and Staff Association has also sought a meeting with Murari Lal Jalan and the Kalrock Capital consortium.
Jet Airways currently has some 2,800-3,000 employees on its rolls. As per the resolution plan, once the airline starts functioning, only 200 will be retained. Of those, 50 will be absorbed in the airline and the rest will be transferred to the ground handling subsidiary. When Jet Airways was a leading airline, it had close to 22,000 employees on its rolls, including 6,000 contact staff.
The employees claim that there is no mention of statutory obligations such as gratuity in the resolution plan. They have requested the labor commissioner to consider their application for gratuity and other payments due to the employees. According to India’s labor laws, payment of gratuity is compulsory.
Jet Airways ceased operations on April 17, 2019, after its debts ballooned and it was not able to carry out its daily operations. It had 115 aircraft on nearly 1,000 domestic and international routes. Founded on April 1, 1992, by Naresh Goyal, it remained in operation for nearly 27 years. Although Jet Airways lost its leadership position in the domestic circuit to low-cost carrier IndiGo, it commanded a leading 12% share of the international market.
The National Company Law Tribunal on June 22 cleared the proposal to revive the airline. While different categories of creditors made claims of about 402 billion rupees, the consortium had offered to settle claims of 4.75 billion rupees of financial and non-financial creditors. As for banks, the consortium had earmarked only 3.85 billion rupees, against their total claim of about 78 billion rupees, translating into a haircut of about 95%.
Of late banks are drawing flak for accepting sharp haircuts, and this is over and above the massive loan write-offs extended to corporations. Recently the debt-laden Videocon Industries was sold to Twin Star Technologies for a haircut of 96%. In another case, the creditors of Siva Industries Holding Limited accepted a one-time settlement by former promoter C. Sivasankaran offering just 6.5% of the total debt of 48.63 billion rupees.
There are reports that the federal government may review legal provisions that permit the withdrawal of legal proceedings in the Insolvency and Bankruptcy Code for a nominal one-time settlement. Officials feel that a 2018 amendment in the code that allows the committee of creditors to withdraw the insolvency application, with the approval of a 90% majority, is being misused.