Naresh Goyal, the chairman of India’s second-largest commercial airline Jet Airways has been forced to resign amidst the stricken carrier’s continued financial crisis. Currently two thirds of the airline’s fleet has been grounded due to defaulting on lease payments or inability to carry out mechanical repairs. As at the end of March 2018 Jet airways was carrying US$1.6 billion in debt and had posted operating losses in nine of the past 11 years while struggling to pay off debt.
The resignation of Goyal, along with his wife Anita, comes after continued pressure from creditors. Banks will now receive 114 million new shares in the company, providing it with an immediate emergency fund of up to US$218 of additional debt. While Etihad remains a major shareholder, lenders will now become the majority shareholder with over 50 percent of the company.
“The Jet Airways debt saga has entered a decisive phase,” said Rajesh Narain Gupta, managing partner of law firm SNG & Partners. “Banks have no other option but to pick up the major stake and find a new promoter for the debt-laden airline. However, it remains to be seen how successful banks become in managing an airline, going beyond their core competence.”
Lenders led by government-owned State Bank of India, have proposed an intricate bailout package, under which banks will take a majority of the company for 1 rupee — one U.S. cent — while giving the ailing airline time to arrange fresh equity. Jet’s board have approved the proposal and have cleared a plan to set up an interim panel to monitor daily operations and cash flow while new investors are being sought.
