Jet Airways, which stopped flying since April 17, is now in the bankruptcy court after an insolvency petition filed against it by creditors.

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As the second major domestic air company after Vijay Mallya-owned Kingfisher Airlines to fly into the sunset in the last seven years, its long-term repercussions in the aviation market with a sudden drop in capacity, is going to perceptive. 

As we get out of the non-peak season that we currently are in, airfares may go up significantly till such time that other aviation companies expand their fleet. The insolvency process will allow lenders led by State Bank of India (SBI) to sell the company as a whole or hawk off its assets in an attempt to salvage at least a part of their investments.

Surely, lenders took the final call to refer the airline to the bankruptcy court only after exhausting all options. On the same day when NCLT admitted the case, SBI chairman Rajnish Kumar tried to placate shareholders at the annual general meeting after several of them raised concerns about the resolution process.

Like other lenders, SBI too has set aside money as provisions for the cash-strapped airline than what is required under Reserve Bank of India’s (RBI) norms. Lenders managed to displace its promoter Naresh Goyal from the Board, but failed to find a credible investor with deep pockets. It is almost certain that they are likely to lose most of their exposure of Rs 8,500 crore.

The total liabilities of the airline, including unpaid salaries and vendor dues, are nearly Rs 15,000 crore. The banks, which took charge of the airline and subsequently ejected the promoter, will have to do a lot of answering on their failed effort to settle it outside the purview of the insolvency tribunal. They are resigned to the fate that there is nothing much left with Jet now, barring its licence, brand and slots, which may fetch some value.