On Tuesday, March 13, former Jet Airways chairman Naresh Goyal said the airline needed a large cash infusion by next week because of its poor financial performance. In a letter to majority equity partner, Etihad Airlines, Goyal said Jet needs a “lifeline” of Rs 750 crore.
Addressing Etihad Airlines CEO Tony Douglas, Goyal said the Ministry of Civil Aviation has allowed lenders to convert their JetPrivilege shares into cash for the interim.
Citing the airline’s “precarious position” after 50 of its aircraft were grounded, Goyal asked for further investment.
Jet’s financial history
Jet Airways started making headlines after it began struggling with finances and creditors.
In August 2018, Jet asked its employees to take a 25% cut in salaries. Later, the airline managed to pay only 84% of its staff.
However, in February, the State Bank of India (SBI) announced an approved bailout plan for Goyal and his company.
According to the Bank-led Provisional Resolution Plan (BLPRP), lenders can convert their loans into equity and become shareholders in Jet. It’s to infuse a much-needed Rs 8,500 crore into the airline, which will give SBI, a majority lender, 50.1% equity.
Goyal and Etihad, both, have halved their stakes down to 25% and 12%, respectively.
Qrius previously reported that while the BLPRP discussed the airline’s financial future, Jet still needed cash temporarily for repayments and operating expenses.
What are the next steps?
At the time, the banks, Goyal, and Etihad could not reach an agreement on the source of this interim funding.
Now, however, the issue of interim funding is unavoidable, as Goyal communicated to Etihad in his letter.
“I now look forward to your support and cooperation in saving the airline by an urgent fund infusion of Rs 750 crore by early next week, so that a matching contribution from banks is also disbursed, as per the resolution plan,” he wrote.
Reports also say that Etihad along with a new investor will fund the airline nearly Rs 4,000 crore.
This new investor has not been officially revealed, but the Economic Times reported it was the National Investment and Infrastructure Fund (NIIF).
NIIF will also get a 20% stake in Jet Airways.
Moving forward, Jet Airways will be run entirely by a board of directors.
Other than himself and his wife Anita, Goyal may have the power to nominate up to two people to the board. Money Control reported that he will likely name his son, Nivaan, to a seat.
A power struggle between Goyal and Etihad has been at the heart of the dissolution process. Goyal even said that Etihad could work out the terms of the interim funding bilaterally with the lending banks.
But as long as Jet receives the cash it currently needs, the airline will survive long enough to witness a peaceful financial resolution.
Rhea Arora is a staff writer at Qrius.