For Jet Airways and its promoters—Naresh Goyal and family—the wheel has turned full circle. After weeks of jostling, a consortium of banks led by SBI has forced Naresh Goyal to step down, and they have converted some of the debt into 51 per cent equity to take control.
After running the first successful private, full-service airline in India for 25 years, it is virtually curtains for Naresh Goyal, whose shareholding will come down to around 25 per cent. For the beleaguered airline, the boardroom coup comes not a day too soon. The `1,500-crore lifeline the creditor banks now throw will help pay salaries and keep the planes flying. For some time.
Banks are in the business of lending and are not supposed to run airlines. It was a desperate measure, and the SBI consortium sees it as a short-term deviation. The stated aim is to sell it off as a going concern to recover some of the piled-up debt, now close to Rs 8,000 crore.
Jet Airways’ downward spin after the disintegration of Kingfisher Airlines holds many lessons.
How did the Goyal family squander an opportunity after having a virtual monopoly of the airways for over a decade? Given the high cost of aviation fuel and cut-throat competition, is there hope for private airlines in India?
The more immediate question is: Will the banks be able to sell off the airline within the two-month window they sought? Or, will Jet be another albatross around the neck of the NPA-ridden state-owned banks? If the banks are not to bleed to death, they will have to ensure a hard-nosed sale schedule, cut red tape and be flexible enough to ensure a deal happens.
To protect the interests of the investors and the future of the airline, amalgamation with an existing player is the best option—it will make a turnaround possible and reduce competition in an overcrowded space.
If there’s going to be waffling, as we saw in the Air India privatisation, we might as well write Jet’s obituary right now.