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Banks ask Naresh Goyal to pump in Rs 3,000 crore in Jet Airways

Say they will agree for long-term restructuring only if Jet promoter cobbles up the amount; Goyal has offered to pump in Rs 700 crore

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Banks have asked Jet Airways chairman and founder Naresh Goyal to bring in an equity of at least Rs 2,500-3,000 crore for them to agree on a long-term restructuring package to save the floundering airline, whose losses have crossed Rs 1,200 crore for the half year ended September 2018. Having failed to cobble up the money, one of the main demands of the bankers, the airline is yet to sign the resolution plan. The deadline for implementing the revival plan is June 30, 2019, failing which the banks will be forced to take the airline to National Company Law Tribunal (NCLT).

"The money on offer by Goyal will not be enough for banks to undertake a viable restructuring package.Unless there is an equity influsion of at least Rs 3,000 crore we will be unable to undertake a restructuring exercise which would include additional loans, extension in repayments," said a banker who is part of the consortium that lent money to the airline.

Last week Naresh Goyal last week in a letter to SBI chairman had said that he will bring in Rs 700 crore and that his equity holding in the company should not fall below a threshold of 25%.

In April 2013, United Arab Emirates (UAE) headquartered Etihad Airlines bought a 24% stake in Jet at a 31.7% premium to Jet's share price Rs 573.85. But now Etihad is bargaining hard to raise its stake to 49% from 24% at Rs 150 a share, a steep discount from the prevailing share price of Rs 276.86 and immediate infusion of $35 million into the airline. Etihad CEO Tony Douglas has also insisted on the complete exit of Naresh Goyal and his family from the management of the carrier. He has also demanded that Goyal's future role as chairman emeritus should also be defined.

Bankers say it is time for fresh management to come into the airline. Whether Etihad is the best bet is hard to say as it has also seen a sharp contraction its revenues. Bankers rue that Jet did not capitalise on its monopoly position when in 1993 when competition was not so intense and ticket prices were high. National carriers like Air India and Indian Airlines were hardly a threat.

East West Airlines and Damania Airlines, which were its competitors, shut shop by 1997. For a decade, Jet had a free run until Captain Gopinath came along to change the dynamic of the business. He started a budget airline Air Deccan in 2003, which radically changed the fare structure, providing opportunity for a large number of Indians to take to the skies at a fraction of the existing fares. Another set of budget airlines, including IndiGo, SpiceJet and GoAir, burst on the scene, eyeing the huge market for cheap air travel.

In 2005, liquor baron Vijay Mallya started Kingfisher Airlines, a full service carrier, giving a tough competition to Jet with its superior services.

The turning point for Jet, however, was when it made a costly mistake of acquiring Air Sahara in April 2007 at Rs 1,450 crore, an expensive deal that never gave the airline the returns that it had hoped after it launched its budget carrier Jetlite.

Under-cutting of ticket prices by budget airlines and the volatility in the fuel prices left Jet bleeding, making it difficult for it to run its services efficiently. For the fourth quarter ended March 2018, the airline reported a loss of Rs 1,045 crore, which went up to Rs 1,323 crore in the first quarter of the financial year and Rs 1,298 crore in the half year ended September 30, 2018.

But the time is running out, and the bankers may find it difficult to wait for too long as the debt continues to bloat and fears grow that the airline may be grounded.

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