Giving up chairmanship after more than 26 years, embattled Jet Airways’ founder Naresh Goyal on Monday quit as a board member, with the lenders taking control of the cockpit and deciding to infuse Rs 1,500 crore immediately into the ailing airline.
Struggling to stay afloat amid a debt burden of over Rs 8,000 crore, the board of the country’s first private full-service carrier also approved the conversion of banks’ debt into equity and induction of nominee directors of the lenders, who would become majority stakeholders.
Expressing happiness over the lenders’ decision, Finance Minister Arun Jaitley said India needs more aircraft and airlines, “otherwise airfares would rise”.
“Banks have kept self-interest in mind by trying to keep it as a going entity so that they can recover their dues,” he said in the national capital hours after the airline’s board cleared the debt resolution plan.
Bringing an end to weeks of uncertainty over the future of the cash-strapped carrier, the board has approved immediate fund infusion of up to Rs 1,500 crore by lenders as well as conversion of debt into equity.
Naresh Goyal, his wife Anita Goyal and Etihad Airways’ nominee director Kevin Knight have quit the board.
Gulf carrier Etihad, a strategic partner, holds 24 per cent stake in Jet Airways while Naresh Goyal has a shareholding of 51 per cent.
Post rejig, Goyal’s stake would come down to 25 per cent while that of Etihad would reduce to 12 per cent.
The consortium of Indian lenders, led by State Bank of India (SBI), would become the majority shareholders of Jet Airways, the airline said in a statement.
The airline said two nominees of the promoter and one nominee of Etihad Airways would continue on the board, which would also see induction of two people nominated by the lenders.
SBI Chairman Rajnish Kumar said Naresh Goyal would be eligible to bid for the airline when the lenders auction it next month.
The board approved the conversion of “Re 1 of lenders’ debt into equity by the issuance of 11.4 crore equity shares”, in accordance with RBI circular issued on February 12, 2018.
As per that circular, lenders have to start the resolution process under the insolvency law if a borrower fails to repay in 180 days after the first default.
Shares of Jet Airways, which has been operating for over 25 years, zoomed 15.5 per cent on Monday after reports of Naresh Goyal’s exit poured in. The official announcement about the revamp came soon after the markets closed.
“The company will also engage with payment intermediaries for the release of trapped cash. 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 re-deploy 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,” it noted.
The financial crunch has forced the airline to ground more than 80 of its total 119 planes. At least 54 aircraft have been grounded due to non-payment of lease rentals.
An Interim Management Committee (IMC) has been constituted to oversee the overall financial and operational performance of the airline. The panel would be under the overall supervision of the board of directors with the support of McKinsey & Co.
“As part of the resolution plan, the lenders will also begin the process of sale/issue of shares to new investors which is expected to be completed in the June quarter,” the statement said.
Naresh Goyal, who became chairman of the company in April 1992, said no sacrifice is too big for him to safeguard the interest of the airline and the families of its 22,000 employees.
In a letter to employees, Goyal said the decision to step down from the board is not the end of the journey but the start of a brand new chapter.
Approval of the debt-recast plan will put the carrier on a “sounder and sustainable” financial footing, he said.
Against the backdrop of salary payments being delayed, the airline said the promoter and all stakeholders “remain fully committed to ensuring deferred salaries and dues to external vendors and aircraft lessors are cleared on priority in the foreseeable future”.
SpiceJet Chairman and Managing Director Ajay Singh said, “Today is indeed a sad day for Indian aviation”.
“By launching a truly world class airline, Naresh and Anita Goyal made India proud. 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,” Singh said
According to Jet Airways, the board unanimously and unequivocally lauded Goyal’s vision in giving birth to the iconic brand and also averred that he has always been way ahead of the times.
The board also appreciated Goyal’s sterling role in IATA, resulting in the innumerable airline codeshare partnerships he built for the airline.
The International Air Transport Association (IATA) is a grouping of around 290 airlines, including Jet Airways.
“The board also took particular and deeply grateful cognisance of the Chairman’s noble, large-hearted self-sacrifice in graciously stepping down from all that he held dear for the sake of the 22,000 employees of the company,” the statement said.