Yogesh Sarkar
Administrator
Naresh Goyal has stepped down as Chairman of Jet Airways. Banks have agreed to infuse further Rs. 1,500 crores in to the airline and for that, they will be issued 50.1% shares at Rs. 1 each. With less than 30 of Jet Airways original fleet of 119 planes flying, banks are hoping to recover the money by selling of the company by May end.
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A 28-year journey came to an end on Monday as Naresh Goyal, founder chairman of Jet Airways, finally stepped down following pressure from lenders. By doing so, Goyal may have ensured the survival of the airline as his departure was one of the conditions stipulated by lenders, led by State Bank of India, who will now infuse Rs 1,500 crore of emergency funds.
Lenders agreed to pump in funds as this was the only way to keep the airline operational and give them a chance to recover their dues of over Rs 8,000 crore. The government was also keen that the carrier continue to operate as closure would cause large-scale job losses, severely reduce airline capacity in the country and wipe out any chance of creditors recovering their money.
Although the emergency funds will help Jet Airways continue operations, customers will face disruption for a few weeks as several aircraft have been grounded since the tickets were sold. Of its total fleet of 119 aircraft, less than 30 are understood to be now flying. However, bankers say there will be more certainty for those buying tickets now.
Besides getting Naresh Goyal and his wife Anita Goyal and the Etihad representative to step down from the board, banks have also got the company to issue them 11.4 crore shares for Re 1 each, which makes them the largest shareholders with a 50.1% stake. SBI chairman Rajnish Kumar said the shareholding is temporary, and a buyer will be found by end-May 2019. As the sale is happening out of the bankruptcy process, Goyal is not barred from bidding but this is seen as unlikely as he could not come up with even the Rs 750 crore sought by banks. Etihad, whose stake will be halved to just below 12%, will take a call on bidding for the airline by the month-end.
Lenders wanted the promoters out of the airline to facilitate the entry of strategic investors. Banks decided to invite outside investors after promoters failed to bring in the Rs 750 crore demanded by banks.
“This is a decision the creditors have taken because they have kept legitimate self-interest and public interest in mind. The self-interest of the banking system is that the company must survive so that their investment remains and if it prospers they can get back their money, the debt can be serviced,” finance minister Arun Jaitley told a news conference in Delhi.
Jet board has approved the bailout package and agreed to a proposal by banks to have an interim management committee running the airline until an investor comes in. The airline share price rose 12.7% to Rs 254 on Monday following Goyal’s decision to step down.
Goyal, considered a pioneer in Indian aviation in the post-liberalization era, had begun his career as a travel agent and representative of overseas airlines nearly 50 years ago. He started Jet Airways in 1991 and the airline started flying two years later. It became India's largest airline by passenger market share in 2010 after acquiring Air Sahara in 2007.
This competition from low-cost airlines made it difficult for Jet to raise fares. As a result, Jet reported losses in nine of the last 11 years. The company continued to operate as a full-service carrier even as the market started shifting towards no-frills airlines such as Indigo Airlines and SpiceJet. Jet continued to have steady loyalty among business travellers who had locked into the company’s loyalty programme, which is operated by Jet Privileges, a company-owned by Etihad group.
Last year, Arvind Gupta, trustee of Indian Investors Protection Council, the ICICI Bank-Videocon Industries whistleblower, had, in a complaint to the government, alleged that Goyal had siphoned off funds through related party transactions.
Source: ToI
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A 28-year journey came to an end on Monday as Naresh Goyal, founder chairman of Jet Airways, finally stepped down following pressure from lenders. By doing so, Goyal may have ensured the survival of the airline as his departure was one of the conditions stipulated by lenders, led by State Bank of India, who will now infuse Rs 1,500 crore of emergency funds.
Lenders agreed to pump in funds as this was the only way to keep the airline operational and give them a chance to recover their dues of over Rs 8,000 crore. The government was also keen that the carrier continue to operate as closure would cause large-scale job losses, severely reduce airline capacity in the country and wipe out any chance of creditors recovering their money.
Although the emergency funds will help Jet Airways continue operations, customers will face disruption for a few weeks as several aircraft have been grounded since the tickets were sold. Of its total fleet of 119 aircraft, less than 30 are understood to be now flying. However, bankers say there will be more certainty for those buying tickets now.
Besides getting Naresh Goyal and his wife Anita Goyal and the Etihad representative to step down from the board, banks have also got the company to issue them 11.4 crore shares for Re 1 each, which makes them the largest shareholders with a 50.1% stake. SBI chairman Rajnish Kumar said the shareholding is temporary, and a buyer will be found by end-May 2019. As the sale is happening out of the bankruptcy process, Goyal is not barred from bidding but this is seen as unlikely as he could not come up with even the Rs 750 crore sought by banks. Etihad, whose stake will be halved to just below 12%, will take a call on bidding for the airline by the month-end.
Lenders wanted the promoters out of the airline to facilitate the entry of strategic investors. Banks decided to invite outside investors after promoters failed to bring in the Rs 750 crore demanded by banks.
“This is a decision the creditors have taken because they have kept legitimate self-interest and public interest in mind. The self-interest of the banking system is that the company must survive so that their investment remains and if it prospers they can get back their money, the debt can be serviced,” finance minister Arun Jaitley told a news conference in Delhi.
Jet board has approved the bailout package and agreed to a proposal by banks to have an interim management committee running the airline until an investor comes in. The airline share price rose 12.7% to Rs 254 on Monday following Goyal’s decision to step down.
Goyal, considered a pioneer in Indian aviation in the post-liberalization era, had begun his career as a travel agent and representative of overseas airlines nearly 50 years ago. He started Jet Airways in 1991 and the airline started flying two years later. It became India's largest airline by passenger market share in 2010 after acquiring Air Sahara in 2007.
This competition from low-cost airlines made it difficult for Jet to raise fares. As a result, Jet reported losses in nine of the last 11 years. The company continued to operate as a full-service carrier even as the market started shifting towards no-frills airlines such as Indigo Airlines and SpiceJet. Jet continued to have steady loyalty among business travellers who had locked into the company’s loyalty programme, which is operated by Jet Privileges, a company-owned by Etihad group.
Last year, Arvind Gupta, trustee of Indian Investors Protection Council, the ICICI Bank-Videocon Industries whistleblower, had, in a complaint to the government, alleged that Goyal had siphoned off funds through related party transactions.
Source: ToI
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