The founder of India’s oldest private airline has been forced out

Back on track?
Back on track?
Image: Indian Navy/Indian Ministry of Defence/Handout via REUTERS
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It’s the end of the road for Naresh Goyal. Lenders have finally taken control of the airline he founded over 25 years ago, forcing him out of the board.

Capping weeks of speculation, the consortium of Jet Airways’ domestic lenders, led by the State Bank of India (SBI), have obtained a controlling stake in the carrier, according to a stock exchange filing today (March 25).

Goyal has resigned from the company, and the creditors have set up an “interim management committee” to oversee day-to-day operations. They have also approved an immediate infusion of Rs1,500 crore ($217 million) to keep Jet running.

Last month, the board of directors had given the green light to issue 114 million fresh shares of the public listed company, thus paving the way for a change in its ownership.

The cash-strapped airline needs about Rs8,500 crore to clear its debts as well as pending payments. It has delayed salaries to employees including pilots, who have threatened to go on strike from April 01. Lessors have began recalling their aircraft, and Jet is currently operating only 41 planes, down from a fleet of 120.

Last year was a tough one for airlines in India, due to the rise in fuel prices and the depreciation of the rupee against the dollar. Competition among the carriers also kept them from raising fares. Though Jet was already in the red at the beginning of 2018, it was all but broke by the end of the year.

On Dec. 31, it defaulted on a loan from a consortium led by the SBI. Since then, the bank and other lenders have been meeting to come up with a solution to keep Jet flying.

Anticipating a fund infusion from lenders, investors drove up Jet’s share price by 12.69% on BSE today (March 25). The airline’s stock closed at Rs254.5 apiece, up Rs28.65 from the previous close.

Goyal’s exit marks the end of an era for Indian airlines. “Today is indeed a sad day for Indian aviation,” Ajay Singh, chairman and managing director of low-cost carrier SpiceJet said in a statement. This is also a wake-up call for Indian policy makers. We urgently need to address structural challenges that make India’s airlines uncompetitive to airlines around the world.”