Jet Airways founder, Naresh Goyal has resigned from his position as chairman of the board, as part of the debt resolution process for the airline. His co-founder and wife Anita Goyal has also stepped down from the board of directors. An interim management committee has been set up to run operations in the meantime. Goyal’s stake in the airline has also been cut in half to 25% from 50.5%.
Along with the Goyals, Etihad Airways board nominee, Kevin Knight has also agreed to step down.
The airline’s lenders now manage the company’s operations and will soon start a bidding process for a new investor.
In the meantime, CEO Vinay Dube is currently the acting chairman of the board.
What did Jet say?
In a statement published by the Bombay Stock Exchange, Jet Airways had reported the outcome of its board meeting on March 25.
The airline said that Naresh and Anita Goyal and Knight will be stepping down from the board of directors. Naresh Goyal will also cease to be chairman of the company.
An “Interim Management Committee” will supervise the day-to-day operations of the airline, including its account. A bidding process for a new investor will also start so that lenders can replace Goyal.
Along with converting their debt shares into equity worth Rs. 11.4 crore, the airline’s lenders guided by the State Bank of India (SBI) will infuse an additional Rs 1,500 crore into the airline.
The Economic Times reported that Naresh Goyal’s stake in the company has reduced from 50.5% to 25%. However, the BSE has asked the airline to clarify that piece of information.
Chaotic past week
Last week, was a chaotic one for the airline as its strategic partner, Etihad Airways, as well as the pilot staff, both announced that they were withdrawing their support.
Jet’s pilot union had previously announced that unless a concrete resolution deal for the airline was finalised by March 31, the staff and crew will go on strike.
“We have decided that either the management lets us know about the progress of the resolution plan and the future of the company by March 31 or we will refrain from flying duties,” said National Aviators Guild Vice President Asim Valiani.
Money Control is now reporting that over 200 pilots from Jet may resign. These pilots have attractive job offers from competing airlines like SpiceJet and IndiGo.
However, the airline will also see aircraft from its grounded fleet released periodically as debt is recovered. This might stay tension between Jet management and the staff.
Etihad, a major investor in Jet, told SBI that it was willing to sell its stake in the airline because the debt process was being drawn out too long.
Etihad offered its 50.1% stake in JetPrivilege, an independently run loyalty programme, and 24% stake in the Jet Airways airline.
After the Etihad Airways board meeting commences on March 31, the company will decide whether or not to continue its investment in Jet.
“As a minority shareholder, Etihad is working closely with Indian lenders, the company, and Jet stakeholders to facilitate a solution for Jet Airways”, said an Etihad representative last week.
Etihad’s decision to sell its stake is not one of frustration alone. The airline has had its own financial troubles in the recent past.
It has suffered losses for the past two years, a trend that is predicted to continue for the next year, as well. Additionally, Air Berlin and Alitalia- two of its previous investments—have both filed for insolvency.
Beyond its unsuccessful investments, Etihad is also fielding competition from airlines like Emirates and Qatar.
End in sight for Jet’s financial troubles?
Jet Airways has been functional as the country’s largest airline for a quarter of a century. But like Air India and Kingfisher, it has also found itself in financial struggle.
The airline defaulted on loan repayments worth Rs 1,700 and was unable to pay staff salaries in December 2018.
However, earlier this year, SBI and other lenders began a debt resolution process for the company to rescue it from insolvency.
Goyal’s resignation was one of the key points of the negotiations because lenders, including Etihad, were uncomfortable with Goyal retaining any control in the company. Initially, Goyal refused to give up control of an airline that he founded and grew. He hoped to nominate his son, Nivaan, to the executive board of the company, and expressed his desire to name him his successor.
With Goyal stepping down today, Jet’s debt resolution seems like a closer reality than before.
Rhea Arora is a Staff Writer at Qrius.