Article Written by Shelley Vishwajeet

NEW DELHI — Naresh Goyal and his wife Anita Goyal, the promoters of Jet Airways, who together controlled 50% stake in the airline, have been forced to step down from the Board of the Company, by creditors led by public sector State Bank of India.

The State Bank of India (SBI) has an exposure of over US$300 million in Jet Airways, which had become extremely jittery as the Jet Airways financial crisis worsened in the last few months amid little hope of recovery.

Jet Airways, before being displaced by IndiGo Airlines as the largest airline in the country, in terms of market share, had been reeling under a debt of over US $1.5 billion.

Unable to service the debt or raise any more money from the market, or from its partner Etihad Airways, it struggled to even pay salaries to its pilots and support staff over the last few months.

Photo: Paul Spijkers

While over 30 of its fleet of around 120 aircraft had been grounded in the last few months due to non-payment of lease installments, the situation caused a tremendous image loss as well as annoyance among flyers as flights got canceled without adequate notice.

The nervousness of public sector banks consortium led by SBI was understandable as they had lost huge money when Kingfisher Airlines went bust in 2012-13, which resulted in tons of bad debt amid shrill public and political hue and cry over banks’ liberal and unsound financing of Kingfisher Airlines even when its troubles had become public knowledge. That’s another story!

Etihad, the second largest airline in UAE, which had acquired 24% stake in Jet Airways in 2013, had refused to bail out Naresh Goyal despite many SOS pleas.

The impression one got was that Etihad had lost all trust in Naresh Goyal and they did not want to lose further money. In fact, there was a clear signal from Etihad that they would be happy to exit, offload their stake in Jet Airways, even at a loss.

Jet Airways would have crashed but for the fact that Indian general elections have been announced and amid this highly-charged election environment, Narendra Modi led central government did not want to see a big bad aviation story making headlines as it would have belied their loud claims about the flourishing Indian aviation under their regime.

So, a week back, the government had directed public sector banks, Jet’s prime lenders, to work out a solution and ensure that Jet Airways kept flying.

Under the new ‘Survival Plan’, Naresh Goyal and wife’s stake would come down to  25% from 50%, while Etihad’s will be down to 12% from 24%.

These shares will be acquired by SBI which it plans to sell to the highest bidder. Till then, SBI will manage the airline and infuse further money into this beleaguered airline to keep it afloat. But will there be any taker for equity in a hugely loss making airline? That remains the big question!