Cash-Strapped Jet Airways’ Founder Naresh Goyal Steps Down From Board
The Logical Indian Crew India
March 25th, 2019 / 5:14 PM
After days of nail-biting drama, Jet Airways founder Naresh Goyal and his wife Anita Goyal stepped down from the board of the cash-strapped airlines on March 25. The couple had set up the airlines 25 years ago in 1993. In a notification, the airlines said that Goyal would cease to be the chairman of the airlines.
The notification also stated that the airline will get “immediate funding support of up to Rs 1,500 crore by lenders by way of issue of appropriate debt instrument against security of its assets.”
Jet Airways which is knee deep in over $1 billion in debt was faced with a similar situation in 2013. At a time when the air carrier is struggling to stay afloat, a consortium of lenders, led by the State Bank of India and Punjab National Bank have agreed to grant priority status to both SBI and PNB. This would allow these two banks to provide emergency funding to the airlines.
Last week, a consortium of lenders headed by the State Bank Of India (SBI) said that it is confident in resolving the ongoing cash crisis that has come upon Jet Airways before the end of March. Reportedly SBI had asked the Goyal family to step down from the board so that the spirit of the resolution is in line with the spirit of the bankruptcy code.
The Times Of India reported a source as saying, “He wants to retain control without bringing any money,” while referring to the move to remove Naresh Goyal and his representatives. This news came amidst talks that Etihad was looking to exit the company than helping it.
Jet Airways faces more crisis as the international airline company Etihad Airways wrote to State Bank of India (SBI) stating its withdrawal from the airlines. Etihad Airways owns 24 per cent of the stake of Jet Airways. On the other hand, pilots have declared that they would go on strike from April 1, if their salary arrears are not cleared. On Tuesday, Etihad Airways wrote a formal request to State Bank of India (SBI) asking the bank to buy its shares.
“Etihad wants to exit Jet completely. Any decision now has to come from SBI,” a source said. Etihad CEO Tony Douglas is believed to have discussed this with SBI chairman Rajnish Kumar on Monday.
When contacted, Etihad repeated its earlier statement that it was working with Jet. “As a minority shareholder, Etihad is working closely with Indian lenders, the company and key stakeholders to facilitate a solution for Jet Airways,” The Economic Times reported. National Aviator’s Guild — the organisation representing Jet’s domestic pilots — threatened to stop flying and go on a strike from April 1, if there is no resolution to the ongoing issue and if the arrears of salary are not settled till the end of March. The organisation represents around 1,000 pilots of the airline.
They may not extend help
Etihad’s proposal to pull out its stake has worsened the financial crisis of Jet Airways. According to the memorandum of understanding, Etihad was to infuse Rs 1,600-1,900 crore for a stake of 24.9%, just below the 25% threshold that triggers an open offer.
Jet Airways had asked Abu Dhabi-based Etihad Airways to grant financial help of Rs. 750 crore. Due to operational reasons, Jet had grounded many flights. Many passengers travelling to and with Jet Airways had faced problems. Alternative flights have been rescheduled for them or their ticket money has been refunded, a spokesperson of Etihad said.
Jet-Etihad is the largest combine in terms of flying people from and to India.
Taking notice of the issue, Suresh Prabhu tweeted, “Directed Secretary @MoCA_GoI to hold an emergency meeting on grounding of flights by Jet Airways, Advanced Bookings, Cancellation, Refunds and Safety Issues if any. Asked him to get a report on Jet compliance issues immediately from DGCA @Jayantsinha.”
It has become more difficult for Jet Airways to sustain itself in the aviation industry due to ever-growing competition among companies like Indigo, GoAir and Spicejet offering flights at cheaper prices. Jet Airways has grounded more than 60 planes and cancelled several flights. This accounts for more than half of its flights.
Written by : Shrishti Verma (Intern)
Edited by : Poorbita Bagchi