Founder of India’s beleaguered Jet Airways quits
The airline has debts of more than $1bn and the resignation is part of its rescue plan
Mumbai — India’s troubled Jet Airways said on Monday that founder Naresh Goyal has stepped down as chair and left the company board as part of a rescue plan.
Jet, which has debts of more than $1bn, said its creditors would inject up to $218m of “immediate funding support” into the airline.
Its shares soared 13% in Mumbai.
Indian media reports said that Goyal’s stake in Jet will fall to half the current 51%. The statement said it would also issue 11.4-million new shares.
The Mumbai-based carrier, which until turbulence recently was India’s second-biggest airline, has been forced to ground three-quarters of its 119 aircraft fleet.
This is because it was unable to pay aircraft lessors. Its pilots have also complained of delays in receiving their salaries, while the airline also defaulted on loan payments.
Thousands of customers have been stranded in recent weeks after hundreds of flights were cancelled, in some cases with little or no notice.
Jet, founded by Goyal in 1993, employs more than 20,000 people.
A collapse would deal a blow to Prime Minister Narendra Modi’s pragmatic pro-business reputation ahead of elections starting on April 11.
Air travel in India
India’s air passenger numbers have rocketed six-fold over the past decade with its middle-class taking advantage of better connectivity and cheaper flights.
The country’s aviation sector is projected to become the world’s third largest by 2025.
But like other carriers, Jet has been badly hit by fluctuating global crude prices and a weak rupee, as well as fierce competition from budget rivals.
Alarm bells for Jet first rang in August when it failed to report its quarterly earnings or pay its staff, including pilots, on time. It later reported a loss of $85m.
In February, it secured a $1.19bn bailout from lenders including State Bank of India to bridge a funding gap.
But the crisis has further deepened since, reportedly due to a stalemate in talks between Goyal and the airline’s other major stakeholder, Etihad.
During a previous crisis in 2013, the airline was rescued by Abu Dhabi-based Etihad with a $600m capital investment.
Press reports have suggested that Etihad wanted to reduce its stake.
Goyal remaining on the board and being the controlling shareholder has long been a point of contention with Jet’s lenders.
Goyal, 69, was India’s 16th richest person according to Forbes magazine in 2005. He currently does not feature in the list.
The son of a jewellery merchant in India’s Punjab, Goyal dabbled as a PR manager for Iraqi Airways and also worked as a regional manager for Philippine Airlines before launching Jet Airways.
“With Goyal stepping down, the company can engineer a comeback and revive the airlines,” Devesh Agarwal, editor of the Bangalore Aviation website, said.
“Ultimately, banks will own the airline now and need to find the right leadership immediately and inject funds to contain the crisis,” Agarwal added.