Monday, October 08, 2018

An inside view of Jet Airways’ turbulent past and present

Among the many things at stake at beleaguered private Indian airline Jet Airways is the legacy of its promoter, Naresh Goyal.
Goyal, who established Jet over 25 years ago, is a battle-scarred veteran of India’s highly competitive aviation sector, which has seen the rise and fall of many entrepreneurs. Despite long periods in the red, Goyal’s skills in negotiating tough corners and striking beneficial deals has kept Jet airborne, if not soaring.
For instance, in 2005, when the now-defunct Kingfisher Airlines, led by an ambitious liquor baron, barged its way into a still nascent Indian market, Goyal dialled back by lapping up smaller rival Air Sahara. The deal was hanging fire for many months and was even called off initially in 2006. But a persistent Goyal revived his attempt in 2007 and managed to bring the Sahara India Pariwar-owned airline into Jet Airways’ fold, consolidating the market leadership it enjoyed at the time.
Much later, in 2012, when Indian aviation was opened up to foreign direct investment (FDI), Goyal again used his networking skills to rope in the deep-pocketed Etihad Airways as an investor. After negotiating many roadblocks, the deal went through in 2013, and today, the Abu Dhabi-based airline owns a 24% stake in Jet.
However, what might seal Goyal’s legacy is how he pulls Jet out from its current crisis. The airline, India’s second-largest by passengers flown, is after all in the eye of a storm that has hit the aviation sector as a whole.
After two years of relative calm—small profits aided by low oil prices—the industry is in turmoil again as crude prices have soared and the Indian rupee has depreciated against the dollar.
SpiceJet, India’s fourth-largest airline by market share, posted a loss of Rs38 crore for the first quarter of the ongoing financial year. Market leader IndiGo hasn’t been spared either. The budget carrier’s profit in the April-June period of this year nosedived 97% from a year ago to a mere Rs27.80 crore.
But Jet Airways seems to be facing the maximum heat. It posted enormous losses of Rs1,036 crore and Rs1,323 crore in the March and June quarters, respectively. Besides, the airline is in the dock for alleged tax evasion and is also facing probes by India’s civil aviation regulator for safety lapses.
It is also struggling to pay its employees their salaries. In August, it delayed salary payouts to pilots and engineers; in September, it reportedly failed to pay other employees as well.
The airline is in desperate need of funds. India’s banks, beset with their own bad-loan problems, are wary of sanctioning any more loans to Jet whose total cash and cash equivalents stood at Rs320.50 crore at the end of the last financial year.
08/10/18 Kamalika Ghosh/Quartz

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