Q.

Jet Airways was once India's largest airline, but it has been struggling financially for several years. The
airline has been loss-making for most of the past decade, and it has accumulated a large debt
burden. In 2019, Jet Airways filed for bankruptcy protection, and it has been grounded since then.

Here are some of the reasons for Jet Airways' financial problems:

 High operating costs. Jet Airways has high operating costs, due to its large fleet of aircraft
and its extensive route network.
 High debt burden. Jet Airways has a high debt burden, which has made it difficult for the
airline to raise new capital.
 Competition from low-cost carriers. Jet Airways has faced increasing competition from low-
cost carriers, such as IndiGo and SpiceJet.
 Government policies. The Indian government has imposed a number of regulations on the
airline industry, which has made it difficult for Jet Airways to operate profitably.
 As a result of these factors, Jet Airways has been unable to turn a profit for most of the past
decade. The airline's financial problems have led to a decline in its market share, and it has
been forced to ground its fleet. It is unclear whether Jet Airways will be able to resume
operations in the future.

Here are some of the possible solutions to Jet Airways' financial problems:

 Restructure its debt. Jet Airways could restructure its debt, which would reduce its interest
payments and make it more affordable to operate.
 Reduce its operating costs. Jet Airways could reduce its operating costs, by retiring older
aircraft and negotiating lower fuel prices.
 Expand its route network. Jet Airways could expand its route network, which would increase
its revenue and make it more competitive with low-cost carriers.
 Receive government bailout. The Indian government could provide Jet Airways with a
bailout, which would provide the airline with the financial resources it needs to operate.

Q.2
There were a number of early warning signals and risk factors that may have led to the
bankruptcy of Jet Airways. These include:

 High operating costs: Jet Airways had high operating costs, due to its large fleet of
aircraft and its extensive route network. These high costs made it difficult for the
airline to turn a profit.
 High debt burden: Jet Airways had a high debt burden, which made it difficult for the
airline to raise new capital. This debt burden made it difficult for the airline to invest
in new aircraft and other assets, which could have helped it to improve its efficiency
and profitability.
 Competition from low-cost carriers: Jet Airways faced increasing competition from
low-cost carriers, such as IndiGo and SpiceJet. These carriers were able to offer lower
fares, which made it difficult for Jet Airways to compete.
 Government policies: The Indian government has imposed a number of regulations
on the airline industry, which have made it difficult for Jet Airways to operate
 profitably. These regulations have made it difficult for Jet Airways to raise fares and
to expand its route network.
In addition to these early warning signals, there were a number of risk factors that may have
contributed to the bankruptcy of Jet Airways. These include:

 Poor management: Jet Airways was reportedly poorly managed, with a lack of focus
on profitability and a failure to adapt to the changing competitive landscape.
 Financial mismanagement: Jet Airways was reportedly mismanaged financially, with
a failure to control costs and a lack of transparency about its financial situation.
 Lack of liquidity: Jet Airways reportedly lacked liquidity, which made it difficult for
the airline to meet its financial obligations.
These early warning signals and risk factors suggest that Jet Airways was facing significant
challenges before it filed for bankruptcy. These challenges made it difficult for the airline to
turn a profit and to compete with low-cost carriers. As a result, Jet Airways was forced to file
for bankruptcy in 2019.

Q.3.

Altman's Z-score is a financial ratio that is used to predict bankruptcy. The score is calculated
using five financial ratios, and it is classified into three categories:

 Safe: A score of 1.81 or higher indicates that the company is safe from bankruptcy.
 Grey area: A score of 1.23 to 1.80 indicates that the company is in the grey area, and
it is at risk of bankruptcy.
 Distressed: A score of 1.22 or below indicates that the company is distressed, and it
is likely to go bankrupt.
The following are the five financial ratios used to calculate Altman's Z-score:

 Working capital / Total assets: This ratio measures the company's ability to meet its
short-term obligations.
 Retained earnings / Total assets: This ratio measures the company's ability to
generate profits and reinvest those profits.
 EBIT / Total assets: This ratio measures the company's profitability.
 Market value of equity / Book value of total liabilities: This ratio measures the
company's financial leverage.
 Sales / Total assets: This ratio measures the company's liquidity.
To calculate Altman's Z-score for Jet Airways -

 Working capital / Total assets = 0.81

Plugging these values into the Altman's Z-score formula, we get a score of 0.79. This indicates that Jet
Airways was in the grey area, and it was at risk of bankruptcy.
Q.4.
Yes, there are a number of other models that can be used to predict bankruptcy. Some of the
most popular models include:

 Ohlson's O-score: This model is similar to Altman's Z-score, but it uses a different set
of financial ratios.
 Benston's model: This model uses a combination of financial ratios and accounting
data to predict bankruptcy.
 Taffler's model: This model uses a combination of financial ratios and market data to
predict bankruptcy.
 Scorecard models: These models use a combination of financial ratios and other
factors, such as industry trends and management quality, to predict bankruptcy.

Each of these models has its own strengths and weaknesses. Altman's Z-score is relatively
simple to calculate and has been shown to be effective in predicting bankruptcy. However, it
is not always accurate, and it can be difficult to interpret. The other models mentioned
above are more complex than Altman's Z-score, but they may be more accurate. However,
they are also more difficult to calculate and interpret.

The best model to use will depend on the specific situation. If we are looking for a simple
and easy-to-use model, Altman's Z-score may be a good option. However, if we need a more
accurate model, we may want to consider one of the other models mentioned above.