Light at the end of the tunnel: How Jet Airways can avoid liquidation

By Rohin Goyal

On 20th June 2019, one of India’s pioneer airlines which used to be “THE” airline in India, officially began the Corporate Insolvency Resolution Process [“CIRP”] by order of the National Company Law Tribunal [“NCLT”], Mumbai [1]. Soon after, similar proceedings were initiated in Amsterdam as well [2]. Jet Airways has been plagued by insolvency issues from Mid-2019 and in June, it could not hold off the creditors any longer.  Throughout the entire process, the NCLT has been extremely interested in finding a buyer for Jet Airways. The Court believes that Jet Airways is a major player in the Indian Aviation Market and allowing liquidation would negatively affect lakhs of employees [3]. Recently, the NCLT directed the Committee of Creditors [“CoC”] of Jet Airways to release further interim funds to the Resolution Professional for finding a potential buyer for Jet Airways and its assets. What is astounding is that the NCLT further threatened to hold the CoC in contempt if they fail to follow such directions [4].

Unfortunately, Jet Airways has been unable to find any Indian buyers. This comes at a time when the insolvency process, in both India and Amsterdam, are frustrating financial creditors who would much rather prefer liquidation. In this mess, Synergy Group from Brazil has shown a flicker of interest [5]. Synergy, prior to this, has revived Avianca Airlines in Brazil and had revived it earlier in the decade [6]. If anyone can save Jet Airways, it appears to be the Synergy Group. 

The Synergy Group, however, is yet to give any confirmation or present a resolution plan to the CoC. The main concern for this is because the Director General of Civil Aviation [“DGCA”], under its powers, has taken away flying slots from Jet Airways in various airports, due to  non-usage of the same [7]. Slots are extremely valuable in the aviation industry and tangibly affect the valuation, sale and purchase of airlines. Slots signify the time durations during which a particular airline can land and launch airplanes from any particular airport. Slots are allotted based on a bidding procedure and the highest bids get slots at peak traffic times. Currently, the DGCA has allocated the confiscated slots to airlines such as SpiceJet and Indigo Airlines [8].

It is here that Jet Airways might have a real chance of getting revived by Synergy Group. Synergy has declined from giving any resolution plan until they receive a confirmation of availability of slots from the DGCA [9]. DGCA on the other hand, says that slots will be allocated only via the process of bidding and that they cannot reserve slots for a “potential” buyer. DGCA claims to have legally exercised its discretionary power to revoke slots under the Guidelines for Slot Allocation, May 2013. Thus, both of them are locked in a classic situation where no one is willing to get the ball rolling.

However, a glimpse into the Guidelines for Slot Allocation, May 2013[10], published by the Ministry of Civil Aviation can potentially resolve this deadlock. The reason for this is two-fold.

Airlines have historic rights over their slots.

The general rule in the allocation of slots is called the “Use it or Lose it” rule [11]. Any airline that fails to utilise its allocated slots due to reasons within its control is subject to losing its slots at the discretion of the DGCA [12]. There is however an exception to this rule, called the rule of historic precedence [13]. Typically, slots that are confiscated, are either assigned to other airlines or reissued by a process of bidding (via an airline filing a slot request) [14]. However, an airline whose slots have been taken away can claim a right of pre-emption of these slots should they prove that the series was operated at least 80% of the time during the period allocated in the previous equivalent season [15]. The keywords here are “Previous Equivalent Season”. There are two seasons as per the DGCA, that is winter season and summer season [16]. Winter season lasts from 27th October to 28th March and summer season exists from 31st March to 26th March as per the International Air Transport Association, based on which the Indian Guidelines are framed [17].

Thus, for Jet Airways to claim historic rights of pre-emption, for the slots of February – March 2020, they only need to prove to DGCA that they satisfied at least 80% of the slot timings during October to March 2019. This may be possible considering operations were only suspended in May – June 2019.

Airline slots are transferable in nature.

Why is this important? If Jet Airways were to lay claim on historic rights, the guidelines prescribe that when an airline is merged or acquired by another airline the series of slots held by this airline will be transferred to the acquiring airline. The historic slots held by the merged or acquired airline will be transferred to the acquiring airline which will enjoy the historicity of these slots as if it itself had held these slots [18]. Thus, if Synergy were to acquire Jet Airways, it would also acquire historic rights to these slots and the DGCA would not be able to legally deprive them of the same.

Of course, it is yet to be seen if slots are the sole reason Synergy might consider buying out Jet Airways, however considering the lack of any other buyers and the NCLTs desire to avoid liquidation, this approach would maximise the possibility of sale. The NCLT could consider directing the CoC of Jet Airways to explore this option or seek an answer from DGCA as to whether the historic rights of Jet Airways, based on data from the previous equivalent season satisfies the 80% threshold.

The author is currently in their third year, pursuing their law degree from the Gujarat National Law University, Gandhinagar.


[1] Desk, It’s official: Jet Airways to go under insolvency, India Today (Feb. 5, 2020), https://www.indiatoday.in/business/story/jet-airways-bankruptcy-nclt-order-1552953-2019-06-20.

[2] Dutch court threatens to sell Jet Airways’ confiscated assets, The Indian Express (Feb. 5, 2020), https://indianexpress.com/article/business/companies/dutch-court-threatens-to-sell-jet-airways-confiscated-assets-5925419/.

[3] Jet Airways defers March salary payment to its 16,000 employees, The Economic Times (Feb. 5, 2020), https://m.economictimes.com/industry/transportation/airlines-/-aviation/jet-airways-defers-march-salary-payment-to-its-16000-employees/articleshow/68706979.cms

[4] Vyas, M., Release funds for interim finance, NCLT tells Jet Airways’ lenders, The Economic Times (Feb. 5, 2020), https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/nclt-warns-jet-airways-coc-of-contempt-proceedings/articleshow/73159335.cms?from=mdr.

[5] Jet Airways Gets Expressions Of Interest From Synergy Group, Prudent ARC, Bloomberg Quint (Feb. 5, 2020), https://www.bloombergquint.com/business/jet-airways-gets-expressions-of-interest-from-synergy-group-prudent-arc.

[6] Chowdhury, A., Colombian airline Avianca’s owner shows interest in Jet Airways, The Economic Times (Feb. 5, 2020), https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/south-americas-synergy-evinces-interest-in-jet-airways/articleshow/70832978.cms.

[7] Chowdhury, A., Govt allows airlines to use Jet’s domestic slots till September end, The Economic Times (Feb. 5, 2020), https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/dgca-allows-airlines-to-use-jets-domestic-slots-till-september-end/articleshow/69978933.cms.

[8] Chowdhury, A., Govt allows airlines to use Jet’s domestic slots till September end, The Economic Times (Feb. 5, 2020), https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/dgca-allows-airlines-to-use-jets-domestic-slots-till-september-end/articleshow/69978933.cms.

[9] Jet bidder Synergy seeks clarity on airport slots, The Times of India (Feb. 5, 2020), https://timesofindia.indiatimes.com/business/india-business/jet-bidder-synergy-seeks-clarity-on-airport-slots/articleshow/72893360.cms.

[10] Guidelines for Slot Allocation (2013).

[11] Guidelines for Slot Allocation. Guideline VI, Entry 1 (2013).

[12] Guidelines for Slot Allocation. Guideline VIII, Entry 1 (2013).

[13] Guidelines for Slot Allocation, Guideline VI (2013).

[14] Guidelines for Slot Allocation, Guideline VII, Entry 4 (2013).

[15] Guidelines for Slot Allocation, Guideline VI, Entry 1 (2013).

[16] Guidelines for Slot Allocation. Guideline III, Entry 1 (2013).

[17] International Airlines Timetable Summary, Infrastructure, Regional Development and Cities. (Feb. 5. 2020), https://www.infrastructure.gov.au/aviation/international/timetable.aspx (last accessed Feb. 5, 2020).

[18] Guidelines for Slot Allocation. Guideline IX, Entry 9 (2013).