Naresh Goyal has quit as the chairman of Jet Airways (India) Ltd, stepping down from the board of the airline he founded two-and-a-half decades ago, as part of a plan that involves lenders taking control of the carrier.
Goyal, wife Anita Goyal and Kevin Knight, a nominee of Jet shareholder Etihad Airways, have resigned from the board, the cash-strapped Indian airline said in a stock-exchange filing on Monday.
Jet’s board also approved a plan that will help the airline keep afloat. Its lenders will convert their outstanding debt into equity shares for a token amount of one rupee and take a controlling stake in Jet. The lenders will also infuse Rs 1,500 crore ($217.6 million) into Jet via fresh loans in a bid to restore normalcy to operations.
The board decisions come as the full-service airline struggles to repay its debt of nearly Rs 8,000 crore to banks led by State Bank of India. Of the debt, Jet needs to repay Rs 1,700 crore by the end of March. It has also delayed payments to banks, suppliers, employees and aircraft lessors. Some of its lessors have begun terminating lease deals, forcing Jet to ground many planes.
Jet said its board has also approved the constitution of an interim management committee at the request of the lenders to manage and monitor the daily operations and cash flow of the company.
The lenders will nominate two directors to the Jet board and will shortly initiate an auction process to find a new strategic investor for the company. The process is likely to be completed in the June quarter, the airline said.
Before Jet informed the stock exchanges of the board decisions, the Press Trust of India cited corporate affairs secretary Injeti Srinivas as saying that negotiations between creditors and cash-strapped Jet would be better than bankruptcy proceedings. “I think creditors and the debtor are in discussions. That is the best process,” Srinivas said, in response to a query on whether Jet Airways qualified for bankruptcy proceedings.
Last week, Reuters reported, citing two people in the know, that the central government had asked state-run banks to rescue the airline without pushing it into bankruptcy as Prime Minister Narendra Modi sought to avert thousands of job losses weeks before a general election.
According to the Reuters report, the government had also nudged it’s the National Investment and Infrastructure Fund (NIIF) – created to invest in infrastructure projects – to buy a stake in Jet.
The report said that if the government’s plan for Jet succeeds, then state-run banks including State Bank of India and Punjab National Bank as well as NIIF would together own at least a third of the airline until they find a new buyer.
Currently, Abu Dhabi’s Etihad Airways is Jet’s single-largest shareholder with a 24% stake. According to a Mint report, the board of Etihad Airways will meet on 31 March to take a final decision on whether the Abu Dhabi-based carrier should make a fresh investment in Jet or exit its stake in the ailing airline.