Mumbai: Jet Airways' founder and chairman Naresh Goyal and his wife have stepped down from the airline's board as the cash-strapped Indian carrier closes in on a rescue deal led by state-run banks.
The 25-year-old airline which once controlled a sixth of India's domestic aviation market has been grappling with a financial crunch recently.
In a recent letter sent to Prime Minister Narendra Modi, the National Aviators Guild (NAG) had raised concerns after the pilots' group of Jet Airways revealed that the airline is onthe “verge of collapse”. The pilots had threatened to stop flying from April 1 after salaries, sporadic for the past seven months, were delayed again.
At one point, Jet Airways was operating only 41 out of the 119 aircraft in its fleet. Many international flights were suspended and services from emerging cities like Kochi were halted altogether.
As situation at the beleaguered airline deteriorated, Civil Aviation Minister Suresh Prabhu directed senior officials of his ministry to continuously monitor developments relating to the crisis. With no relief in sight, the government took matters into their hands to avert a situation were thousands of people could be without a job just weeks from the general election.
The government asked state-run banks to rescue this privately held airline. Most companies in Jet's financial condition would have been placed by creditors into India's new bankruptcy process. However, memories of that sparked by Kingfisher Airlines' demise in 2012 have prompted the government to seek a more sober road to rescue.
Saddled with debt of more than $1 billion, Jet owes money to banks, suppliers, pilots and lessors - several of whom have started terminating leases with the carrier. The rescue deal that was proposed by the banks required that Goyal's stake be brought down. They also pushed for Goyal to step down and his exit means he is no longer the chairman of the airline he had found in 1993 soon after India's drastic economic reforms, popularly known as liberalisation, were launched.
The banks, led by State Bank of India (SBI), will convert their debt into equity and take a controlling stake in the airline for a token sum of 1 rupee ($0.0145), Jet said in a statement to the stock exchanges after its board met earlier on Monday.
The banks will also give the airline a fresh loan of Rs 1,500 crore to meet payments and restore normal operations and the lenders will form an interim management committee to manage the airline, Jet said.
After Monday's meet, it was decided that Goyal's stake will be cut to 25.5 percent from the current 51 percent, while Etihad Airways' stake in the debt-laden carrier will also be halved to 12 percent to make room for the banks to take a controlling stake of 50.5 percent in the airline. One nominee of Etihad Airways PJSC has also stepped down from the board.
The reports of Goyal's departure led to a rally in Jet's shares of more than 15 percent.