Naresh Goyal no longer a Jet setter

After holding on for past several months, Naresh Goyal, founder of cash-strapped Jet Airways stepped down from the Board and chairmanship of the airline on Monday, bringing down his share (along with family) to 25.5% from 51% previously.

Goyal's wife Anita and Etihad Airways representative Kevin Knight are the others who have withdrawn from the Board. The development paves the way for the lenders to infuse Rs 1,500 crore of funding, which is expected to bring some normalcy to the airline's troubling situation.

"For the sake of my family of 22,000 employees and their respective families I have today taken the step of stepping down from the Board of Jet Airways," Goyal said in a statement on Monday.

Further, an interim management committee to be set up by the lenders led by State Bank of India (SBI) will now manage the daily operations of the airline until the lenders are able to sell/issue shares to a new investor/s. The entire process is likely to get completed by June.

Sources in national carrier Air India said the airline's CMD Ashwani Lohani is one of the contenders to head the operations of Jet Airways during the interim period before Jet Airways is sold to a new investor.

The SBI executives involved with the deal said the lenders are likely to call for expressions of interest (EoIs) by April 9 with the end of next month being the deadline for binding bids.

Mumbai-based Jet Airways has been scouting for investors in order to turn around. The insiders claim that almost all the investors wanted Goyal to relinquish his control in the airline before making any infusion. However, Goyal, who started out his career in aviation as a ticketing agent and had been the airline's chairman since its inception about 25 years ago, refused to give in.

The boiling point came when Jet Airways's Abu Dhabi-based equity partner Etihad Airways, which had earlier showed its inclination to further funding, backed off recently and even offered to offload its existing stake to the lenders if its conditions, which included Goyal stepping down from the Board, were not met. This prompted the lenders to finally ask Goyal and his wife Anita to step down from the Board, the industry insiders said.

Talking about revised framework for the resolution of stressed assets, Jet Airways in a regulatory filing said immediate funding support of up to Rs 1,500 crore by lenders by way of issue of appropriate debt instrument against the security of its assets will restore normalcy to the carrier's level of operations. Further, the lenders will convert their debt into equity and take a controlling stake in the carrier by paying a token sum of Re1 for 11.4 crore equity shares.

"The airline will leverage the funding to partly clear pending dues towards lessors, vendors, creditors and employees in a phased manner. The move will see Jet Airways redeploy several of its grounded aircraft back into its network, helping renew many of the routes it had temporarily suspended, which will help restore normalcy of operations, aiding the airline's long-term transformation to continue expansion and to regain its position as a global player," the airline said in a statement.

According to Mark Martin, founder and CEO of Dubai-based Martin Consulting, the immediate funding of Rs 1,500 crore is not enough. "The airline will need at least Rs 6,000 of funding to bring it back to profitability," Martin said, adding that it will take around six months for Jet Airways to fly on its full strength again as lessors need to be paid and convinced to lease the aircraft again. "But most importantly, the airline needs a good leadership to steer it towards profitability."

The airline till date is said to have grounded about 84 aircraft, most of which are due to non-payment of dues to the lessors, leading to massive cancellations and disruptions for fliers.

The development at Jet Airways, along with the grounding of around a dozen Boeing 737 Max planes by SpiceJet after the crash of an Ethiopian Airlines plane and cancellation of significant number of flights by IndiGo due to pilot shortage has resulted in reduction of about a million seats on the domestic sector, claim the industry observers and travel agents.

The sudden shortage in capacity quickly led to fares skyrocketing, causing massive inconvenience to the general passengers. Further, Jet Airways defaulted for months in paying full salaries to its top management, senior pilots and others. The pilots union even went to the extent of saying that they would be forced to go on strike from April 1 unless the airline management provides them with an assurance with regard to salary disbursal.

Though Jet's shares jumped by 17.77% in intra-day trade on Monday before closing with a gain of 12.69% at Rs 254.50 on BSE, the development has certainly not gone well with some of his industry peers who describe it as a "sad day" for Indian aviation.

Ajay Singh, CMD of budget carrier SpiceJet, said, "This is also a wake-up call for Indian policymakers. We urgently need to address structural challenges that make India's airlines uncompetitive to airlines around the world."

Finance minister Arun Jaitley, however, said, "I am happy with lenders' decision on Jet Airways; PSBs (public sector banks) have kept legitimate self-interest and public interest in