Jet Airways chairman steps down as banks move in with rescue plan

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Jet Airways Chairman Naresh Goyal will step down from the board of the Indian carrier he founded 25 years ago and its lenders will seize control, the company said, as part of a deal led by state-run banks to save the airline from bankruptcy.

Saddled with debt of more than $1 billion, Jet has been on the brink of collapse and had to ground more than two-thirds of its fleet as it struggled pay lenders, suppliers, pilots, and leasing companies.

Banks have moved in to take a majority stake in the airline after Jet failed to convince potential investors, including its largest shareholder Etihad Airways, to save the airline.

Goyal’s departure, however, could reignite investor interest in India’s oldest private airline. Tata Sons in November had been in talks to invest in Jet on the condition that Goyal would step down or take a less prominent role, sources have said.

Saving Jet is crucial for Indian Prime Minister Narendra Modi as he looks to avoid thousands of job losses ahead of a general election. His government urged state-run banks to rescue the airline without pushing it into bankruptcy, sources have told Reuters.

Under the rescue plan, Jet’s lenders, led by State Bank of India (SBI), will take a controlling stake of just over 50 percent, the airline said in a stock exchange announcement.

The banks will issue a loan of $218 million (15 billion rupees) to meet Jet’s obligations and will form an interim management committee to oversee operations, it added.

Jet will use the money to partly clear dues owed to lessors, vendors, creditors, and employees in a phased manner, the airline said in a separate statement. It will re-deploy several of its grounded aircraft and renew many of the routes it had temporarily suspended.

Goyal’s 51 percent stake has been halved to make room for the banks, according to reports by Indian TV.

“No sacrifice is too big for me to safeguard the interest of Jet Airways and the families of the 22,000 employees,” Goyal said in the statement.

As part of the bailout plan, lenders will start a bidding process to sell their stake in the airline to a new investor. In the meantime, they will nominate two directors to Jet’s board.

Bids to buy a stake in Jet will open on April 9 and close on April 30 with the expectation that a new investor will be in place by May 31, SBI Chairman Rajnish Kumar told CNBC-TV18, adding that even Goyal would be eligible to bid for it.