Tuesday, February 19, 2019

Naresh Goyal's exit from Jet Airways key to its survival, says industry expert

On Thursday, the struggling Jet Airways announced its third quarter results reporting net loss of Rs 732 crore, its fourth consecutive quarterly loss. It also announced a bank-led resolution plan to bring the airline out of its current mess.

Under the resolution plan, the stake of Naresh Goyal, the chairman of Jet, is expected to fall from 51 per cent (as on December 2018) to about 20 per cent while lenders, led by State Bank of India, would become the largest shareholders in the Mumbai-based carrier.
Under the new plan, the future of 69-year-old Goyal as the head of the airline remains uncertain. It's believed that Goyal has lost his bargaining chip for dragging the airline to a point where its survival is seriously under jeopardy. Industry insiders say that it's a daunting task -- if not too late -- to revive Jet at this stage, and having Goyal on the board wouldn't help much.
So far, Jet management has stayed mum on the role Goyal is likely to play in the airline that he had started 26 years ago after working as an assistant in a travel agency. In a recent analyst call, the airline's CEO Vinay Dube said that "the promoter will be the Chairman of the Board. Jet Airways will continue the structure of a professionally run management reporting to the Board of Directors".  As per the plan, the lenders would get to appoint their nominees on the Jet's board, which means that there is a possibility of Goyal losing control in the new set-up.
"It boils down to Goyal," says an aviation industry veteran adding that because of Goyal's ego, the airline could not strike a deal with Tata Group. "Tatas allegedly wanted Goyal out. They might have retained Jet's identity but they wanted to derive synergies between Vistara and Jet, which needed Goyal to hand over the reins. For long, Goyal has been working on emotional impulse, rather than on corporate practicality. The key to Jet's survivability is Goyal's exit from the airline," says expert.
The resolution plan estimates a funding gap of Rs 8,500 crore for Jet, including repaying aircraft debt of Rs 1,700 crore. So even as the new plan is expected to take care of the debt burden, but the airline will continue to struggle operationally as it is financially weak, and some of its aircrafts are grounded due to non-payment to lessors. A new leadership, appointed by lender banks, would further deteriorate the situation given the poor track record of bankers in running troubled companies.
18/02/19 Manu Kaushik/Business Today