Podcast | Jet Airways Founder Steps Down, What’s the Plan Ahead?

How are lenders planning to bail the debt-ridden Jet Airways? Tune in to The Big Story!

Jet Airways founder Naresh Goyal and his wife Anita stepped down from the board, on 25 March, Monday, after Jet went went into a debt of Rs 8,000 crores.

(Photo: The Quint)

Jet Airways founder Naresh Goyal and his wife Anita stepped down from the board, on 25 March, Monday, after Jet went into a debt of Rs 8,000 crores. In today's big story we talk about how Jet airways ended with a debt that big and the ongoing plans of how to bail it out.

Tune in!

If you look at it, it's not just jet, India's aviation industry has never really looked up but Jet airways' troubles began with the new players IndiGo and Spice Jet.

But the difference between Jet and the others is that Jet is a full service carrier and the others were budget carriers so of course their tickets were cheaper. So even when jet had to lower its ticket prices, it was still providing services that the budget carriers weren’t.

Now what eats up half the cost of airlines is the aviation turbine fuel, when it shoots up the airlines run at a loss, what adds more woes to this sometimes is the falling rupee. And both hit jet airways hard last year when the aviation turbine fuel prices went up at an all time high and when the rupee fell to an all time low and from then onwards it was a sinking ship. With its lowered fares it clearly couldn't cope.

Jet had a negative worth of Rs 7,242 crores by the end. It had defaulted on its dues to the banks, it didn't even pay the staff their salaries, a majority of its planes remain grounded, and there has been a lot of cancellation in the last few months. In fact, the crisis reached such a point where pilot said they wouldn’t fly from 1 April if their salaries weren’t cleared.

So all the lenders – a consortium of banks led by the SBI and even Etihad airways which has a 24% stake in the airlines, demanded Naresh Goyal and his wife step down and have their stakes reduced before doing anything.

Naresh Goyal had tried really hard to delay this but in the end he had to give in. But what plans are being made to secure the 23,000 jobs that are at stake?

Etihad Airways was supposed to pump in Rs 750 if it approved of the resolution plan. The Etihad Airways board will meet on March 31 to take a final call on whether it will help Jet airways or exit the deal. But we have to consider that Etihad itself is bleeding cash so it might re-think before bailing Jet.

As for the consortium of banks led by SBI – they will pump in Rs 1,500 crores immediately and also convert their debt into equity and take a controlling stake. Then the banks will have to sell their stake to a new investor, of course if past cases of defaulting are of any proof finding a buyer is easier said than done.

Given the elections are close, the urgency to resolve this crisis is also on the government’s top priority, but a short term plan will not really help, considering that it's not just jet but the entire aviation industry that has been doing poorly.