Jet Airways chairman Naresh Goyal, and his wife Anita Goyal, stepped down from the airline’s board on Monday, 25 March, to allow the board to move ahead with a debt recast plan for rescuing the carrier he founded in 1993.
Goyal will cease to be the chairman of the airline. According to the statement, the board has also approved immediate funding support of Rs 1,500 crore by lenders via debt.
This development comes after the airlines had to ground majority of its fleet due to unpaid dues. Lender wanted Goyal to step down to allow fresh funding for the beleaguered airlines.
The first signs of cash crunch emerged in August last year, and the situation only worsened.
Here is a lowdown of how things went south for Jet Airways:
Unpaid Salaries, Bank Debts & More: What’s Ailing Jet Airways
1. Jet Airways – Birth and Heydays
Having started its commercial operations in 1993, Jet Airways may well be seen as a child of India’s liberalised economy. Just a couple of years after the country’s economy opened up, Jet entered the aviation sector heavily monopolised by state-owned Air India and Indian Airlines.
Founder Naresh Goyal, who had started his career as a sales agent for Lebanese International Airlines, soon tasted success with Jet doubling its number of passengers to 1.5 million within two years of the first flight taking off.
For two-and-a-half decades, Jet Airways remained one of the leading carriers as it saw peers like Sahara Airlines and Kingfisher Airlines shutting down and new players like IndiGo and SpiceJet coming into the market.
Then came August 2018, when reports suggested that the airline is facing acute fund crunch, and it may shut down within 60 days. The rut, however, had started to settle in much earlier.
Expand2. What Goes Up...
Jet Airways’ filings to the exchanges show that in the last 11 years the carrier has lost money in all but two fiscals and is currently sitting on a debt pile of more than Rs 70,000 crore. For an airline that controls 13.9 percent of India’s aviation market, the numbers may seem unreal, but ironically, the explanation lies within the dynamics of the Indian airspace itself.
In August last year, when the Jet Airways crisis first cropped up, a report in The Times of India said the intense competition in the Indian market forces airlines to sell tickets at a base price of as low as Re 1.
Jet Airways, specifically, was feeling the heat even more as it had to compete with budget carriers like IndiGo and SpiceJet, who entered the market keeping their fares lower than what Jet was operating at. Needless to say, a price-sensitive market like India got hooked soon.
Full service carriers like Jet Airways had to lower their fares too, even as they continued to offer meal and entertainment services, which the budget carriers did not. A Quartz article quotes Ashish Nainan, aviation analyst at CARE Ratings as saying: “Jet clearly had a good niche when they started. The moment they started competing with the low-cost carriers, they lost it”.
The death knell, however, came last year when fuel prices touched all-time high and rupee plunged to an all-time low. It wasn’t long before Jet Airways could not pay salaries, missed payments on bank debts and had to ground its flights.
Expand3. Timeline of Troubles
On 3 August last year, The Economic Times quoted two Jet executives to report that the airline has informed its employees it will not be able to operate beyond 60 days unless cost-cutting measures are undertaken. In a turbulent next few days, the airline denied the report and postponed its board meet for first quarter results.
When it eventually declared its first quarter earnings, it reported a Rs 1,323-crore loss, as compared to a Rs 54 crore profit in the same period a year ago.
Then, in October, ratings agency ICRA downgraded the company's long term loans and non-convertible debentures, and soon after it reported another quarterly loss.
The airlines’ stakeholders got some reason for cheer in November, as speculations became rife that Tata Sons Ltd was aiming to buy a 51 percent stake in the airline owned by Naresh Goyal and Etihad Airways’ 24 percent stake, and merge Jet with Vistara. The deal, however, did not come through.
With the salaries of employees already stalled, in December the airline resorted to another cost-cutting measure when they decided to stop providing free meals to most domestic economy class passengers. Soon, ICRA downgraded Jet Airways again.
Less than a month later, in January, ICRA downgraded the company yet again as it defaulted on debt payment to a consortium of banks.
Through the next couple of months, a slew of reports suggested everything from possible bailouts to Naresh Goyal stepping down. None of them materialised, but Jet was definitely nosediving.
Expand4. How Things Are Stacked Up Now
On Wednesday, 20 March, State Bank of India Chairman Rajnish Kumar said the lenders of Jet Airways will make every effort to keep the embattled airline flying, after meeting Finance Minister Arun Jaitley along with Aviation Secretary Pradip Singh Kharola and Nripendra Misra, Principal Secretary to Prime Minister.
On getting a new player in Jet Airways, Kumar said, "No possibility is ruled out."
"The dialogue with Etihad is on. It is not that they have conclusively decided that they will go out. But there are certain conditions which they want to be fulfilled and it is nothing but that the airline should be professionally managed and without any interference," he added.
Meanwhile, National Aviators Guild (NAG), the pilots’ union of the airline, in a letter to the prime minister has said in a statement that Jet is on the “verge of collapse.” News agency PTI meanwhile reported that the worried pilots have approached SpiceJet.
With the government and big banks like SBI actively stepping in to address the issue, for now it seems the airline will be bailed out some way or the other. In the election season, the government would in all likelihood do everything possible to avert the worst, which might lead to job loss for 23,000 of Jet’s employees.
However, the solution is likely to be more stop-gap than long-term, and might not be enough to deal with the deep-rooted crisis of the highly competitive and largely loss-making Indian aviation sector.
(With inputs from The Times of India, The Economic Times and Quartz)
(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)
Expand
Jet Airways – Birth and Heydays
Having started its commercial operations in 1993, Jet Airways may well be seen as a child of India’s liberalised economy. Just a couple of years after the country’s economy opened up, Jet entered the aviation sector heavily monopolised by state-owned Air India and Indian Airlines.
Founder Naresh Goyal, who had started his career as a sales agent for Lebanese International Airlines, soon tasted success with Jet doubling its number of passengers to 1.5 million within two years of the first flight taking off.
For two-and-a-half decades, Jet Airways remained one of the leading carriers as it saw peers like Sahara Airlines and Kingfisher Airlines shutting down and new players like IndiGo and SpiceJet coming into the market.
Then came August 2018, when reports suggested that the airline is facing acute fund crunch, and it may shut down within 60 days. The rut, however, had started to settle in much earlier.
What Goes Up...
Jet Airways’ filings to the exchanges show that in the last 11 years the carrier has lost money in all but two fiscals and is currently sitting on a debt pile of more than Rs 70,000 crore. For an airline that controls 13.9 percent of India’s aviation market, the numbers may seem unreal, but ironically, the explanation lies within the dynamics of the Indian airspace itself.
In August last year, when the Jet Airways crisis first cropped up, a report in The Times of India said the intense competition in the Indian market forces airlines to sell tickets at a base price of as low as Re 1.
Jet Airways, specifically, was feeling the heat even more as it had to compete with budget carriers like IndiGo and SpiceJet, who entered the market keeping their fares lower than what Jet was operating at. Needless to say, a price-sensitive market like India got hooked soon.
Full service carriers like Jet Airways had to lower their fares too, even as they continued to offer meal and entertainment services, which the budget carriers did not. A Quartz article quotes Ashish Nainan, aviation analyst at CARE Ratings as saying: “Jet clearly had a good niche when they started. The moment they started competing with the low-cost carriers, they lost it”.
The death knell, however, came last year when fuel prices touched all-time high and rupee plunged to an all-time low. It wasn’t long before Jet Airways could not pay salaries, missed payments on bank debts and had to ground its flights.
Timeline of Troubles
On 3 August last year, The Economic Times quoted two Jet executives to report that the airline has informed its employees it will not be able to operate beyond 60 days unless cost-cutting measures are undertaken. In a turbulent next few days, the airline denied the report and postponed its board meet for first quarter results.
When it eventually declared its first quarter earnings, it reported a Rs 1,323-crore loss, as compared to a Rs 54 crore profit in the same period a year ago.
Then, in October, ratings agency ICRA downgraded the company's long term loans and non-convertible debentures, and soon after it reported another quarterly loss.
The airlines’ stakeholders got some reason for cheer in November, as speculations became rife that Tata Sons Ltd was aiming to buy a 51 percent stake in the airline owned by Naresh Goyal and Etihad Airways’ 24 percent stake, and merge Jet with Vistara. The deal, however, did not come through.
With the salaries of employees already stalled, in December the airline resorted to another cost-cutting measure when they decided to stop providing free meals to most domestic economy class passengers. Soon, ICRA downgraded Jet Airways again.
Less than a month later, in January, ICRA downgraded the company yet again as it defaulted on debt payment to a consortium of banks.
Through the next couple of months, a slew of reports suggested everything from possible bailouts to Naresh Goyal stepping down. None of them materialised, but Jet was definitely nosediving.
How Things Are Stacked Up Now
On Wednesday, 20 March, State Bank of India Chairman Rajnish Kumar said the lenders of Jet Airways will make every effort to keep the embattled airline flying, after meeting Finance Minister Arun Jaitley along with Aviation Secretary Pradip Singh Kharola and Nripendra Misra, Principal Secretary to Prime Minister.
On getting a new player in Jet Airways, Kumar said, "No possibility is ruled out."
"The dialogue with Etihad is on. It is not that they have conclusively decided that they will go out. But there are certain conditions which they want to be fulfilled and it is nothing but that the airline should be professionally managed and without any interference," he added.
Meanwhile, National Aviators Guild (NAG), the pilots’ union of the airline, in a letter to the prime minister has said in a statement that Jet is on the “verge of collapse.” News agency PTI meanwhile reported that the worried pilots have approached SpiceJet.
With the government and big banks like SBI actively stepping in to address the issue, for now it seems the airline will be bailed out some way or the other. In the election season, the government would in all likelihood do everything possible to avert the worst, which might lead to job loss for 23,000 of Jet’s employees.
However, the solution is likely to be more stop-gap than long-term, and might not be enough to deal with the deep-rooted crisis of the highly competitive and largely loss-making Indian aviation sector.
(With inputs from The Times of India, The Economic Times and Quartz)
(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)