Hinduja group keen on Jet Airways takeover; seeks Naresh Goyal's consent

Company News

The Hinduja group would be keen to take over Jet Airways, provided lenders agree to take a substantial haircut on their dues and founder Naresh Goyal gives his consent to the takeover. A top official of the group said it sees value in the airline, which is going through a crisis.

“We may look at the airline provided banks agree to take a haircut on debt. The high debt is unsustainable,” said a source close to the development. Jet Airways owes Rs 9,000 crore to banks and has defaulted to banks, suppliers and employees. Its operations have shut down due to lack of funds.
If both banks and Goyal agree, the group will start talks with Etihad, which had made a bid for the airline last week. Goyal owned 51 per cent stake in the airline of which 41 per cent stake is pledged with the lenders. “Goyal has run the airline like his own baby and we do not want to take any action unless he agrees,” the source said.

“Traffic from India is growing substantially and we think, in association with Etihad, we can turn around the airline,” the official said, adding that the group was contacted three days ago for a joint venture.

The airline industry in India has already witnessed similar meltdowns with SpiceJet making a spectacular turnaround after a similar situation. “The airline would need a professional management like other Hinduja group companies where the family members do not interfere in the day-to-day operations of any company,” said the source. Traffic from India is growing and there is a need for an another airline to meet the demand, he added.


The Hinduja group runs successful companies in India, including in commercial vehicle major Ashok Leyland, lubricants player Gulf Oil and has stake in IndusInd Bank. Jet Airways stock was down 4.18 per cent on Wednesday to close at Rs 123.7 a share.

Jet Airways timeline: How the 'Joy of Flying' airline's dreams soured

Current Affairs

Beleaguered carrier Jet Airways halted all operations on Wednesday after its lenders rejected its plea for emergency funding from the airline that was once India's largest private carrier.

The airline, known for its "The Joy of Flying" tagline, has been teetering for weeks, saddled with over $1 billion in debt.

Its lenders, led by State Bank of India (SBI), last month agreed to bail it out in a complex deal that involved the banks taking a majority stake and providing a fresh loan of $217 million, while continuing to look for a new investor. That loan never materialised, gradually crippling the 25-year old airline's operations.

Here are some major developments in Jet's story:

2018

Aug 3 - Jet denies media report it cannot fly beyond 60 days, dismisses rumours of stake sale

Aug 11 - State Bank of India (SBI) chairman says Jet's loan is on watch list. Jet says regularly paying banks.

Aug 27 - Jet posts June-quarter loss, says will inject funds, cut costs by more than 20 billion rupees ($288 million) in two years

Sept 6 - Jet says paid salaries to 84 percent of its employees after media reports that pilots warned 'non-cooperation' over salary default

Nov 5 - Media report says Indian conglomerate Tata Group aims to buy 51 percent stake in airline and merge Jet with Tata's Vistara


 Dec 5 - Jet and UAE's Etihad Airways have been holding rescue talks with Jet's bankers, sources tell Reuters..Read More

Jet's luck has finally run out: What its collapse says about India

Company News

It looks like Jet Airways Ltd.’s luck has finally run out. India’s oldest privately owned airline is on the verge of shutting down all its flights -- it already has perhaps fewer than 10 aircraft active -- because it simply doesn’t have enough working capital. It’s more than a billion dollars in debt and has lost money for the last four quarters.

On one level, you could argue that this is a good sign for India: Its institutions are holding up. State-owned banks are Jet’s biggest creditors and they seem unwilling to throw more money at the airline without a clear revival plan. This is a big change from the past, when they kept supporting one of Jet’s rivals, the ill-fated Kingfisher Airlines Ltd., long after it seemed rational to do so.

News also broke a few days ago that Jet’s founder, Naresh Goyal, was no longer bidding for the banks’ stake in the airline, perhaps because other shareholders wouldn’t play along. Too often India cash-strapped companies have managed to get their debt restructured, with state-owned banks taking a haircut while the “promoters” who control crucial amounts of equity maintain control of the company. That is an unhealthy lack of accountability and we should all be glad it doesn’t seem to be happening in this case.


 Jet has 23,000 employees and a devoted fan base, yet isn’t an easy company to love. I say its luck has run out because in the past it consistently seemed to benefit from government intervention that drove many of its full-service competitors out of the market. It’s the only survivor from the first round of private Indian airlines that started flying in the 1990s -- and, in many Indian sectors, that usually means that you’ve managed the government much better than your peers have.In the end, however, the market wins out. If you are competing against low-cost airlines that still somehow provide equivalent service in economy class -- not to mention a full-service airline, Air India Ltd., that’s state-owned and can absorb whatever losses it wants -- you can’t dodge fate forever...Read More

Jet lenders plan to sell 75% stake, bidder's net worth should be Rs 1000 cr

Company News

Jet Airways India Ltd.’s lenders invited initial bids to buy as much as 75 percent of the debt-laden carrier, starting a process that will determine the future of India’s oldest surviving private airline.
Potential buyers must submit their interest by April 10, State Bank of India Ltd., the lead creditor, said in a document Monday. A strategic bidder should have a net worth of at least Rs 1,000 crore ($144 million) in the preceding financial year, or at least three years of experience in the airline business.

The airline is credited with successfully breaking the monopoly of state-run Air India Ltd. and was once India’s second-biggest carrier, but its fleet has dwindled to 26 planes from 124 as recently as January. Accumulated losses in nine of the past 11 years have caused Jet Airways to delay payments to banks, lessors and employees, while its founder Naresh Goyal was forced to cede control of the carrier.

Jet Airways, part-owned by Abu Dhabi’s Etihad Airways PJSC, needs Rs 8500 crore to get back on its feet after a fare war by budget airlines wiped out profits and it racked up debt of more than $1 billion.

The fate of Jet Airways is crucial to the legacy of Indian Prime Minister Narendra Modi as he faces an election that begins April 11 after holding power for the last five years. While he remains the favorite in the polls, his party has faced setbacks of late and he has been criticized for not living up to a key election promise to create 10 million new jobs a year. A collapse of Jet Airways, with 23,000 employees, could further dent his credentials.

Consortiums submitting bids should have no more than three members, with each holding a share of no less than 15 percent, according to Monday’s document.

 After qualified bidders are selected, they will be provided access to the company’s data and the bid document...Read More

Jet Airways fate hangs in balance over funding delays, depleting sales

Companies News

Jet Airways' fate hangs in balance with fast depleting sales and non-committal stance by Etihad Airways on fresh infusion of funds.

On Monday, the airline's founder chairman Naresh Goyal wrote to staff seeking more time to finalise a resolution plan given its complexities. Goyal's email said he is still in talks with lenders and Etihad, but aviation sources indicated that he is looking for a new investor to keep the company afloat.

On Tuesday morning, civil aviation minister Suresh Prabhu directed the department secretary to hold an emergency meeting on grounding of Jet's flights and asked for a status report.

The delay in fund infusion is leading to massive cancellations and employees are increasingly losing confidence in management commitments. Travel agents too are becoming apprehensive about the future of the airline and a few corporate houses have asked their employees to follow discretion while booking Jet tickets.Jet insiders say its truncated schedule of 200 flights each day is not sustainable to meet expenses.

Amit Kelkar, vice president of Jet Aircraft Maintenance Engineers Welfare Association, wrote to the civil aviation ministry on Tuesday, stating that with repeated payment defaults, members had lost confidence in the management. The letter also warned of safety risks, as engineers were not getting paid.

The National Aviators Guild which represents pilots is meeting this afternoon to decide its future course of action. Earlier this month, the union had written to labour minister Santosh Gangwar about pay delays.


 A section of employees however is still hopeful of a positive outcome over the course of the next few days...Read More

Naresh Goyal seeks Rs 750 crore from Etihad to keep Jet Airways flying

International News

Jet Airways Founder-Chairman Naresh Goyal, in a communication to Etihad group Chief Executive Officer Tony Douglas, has said the airline is in a “precarious” position, with more than 50 planes grounded. Goyal has sought Rs 750 crore immediately from Etihad, while raising concerns over “increasing arrears of vendors and salaries’’ at Jet.

This coincides with Jet Airways informing the exchanges that it has defaulted on part payment of a foreign loan due to liquidity constraints. The part payment was due on external commercial borrowing on March 11.

The amount of the default could not be ascertained, but reports suggest that there was a $150-million loan repayment due by March end.

It is learnt that under the proposed bank-led resolution plan to rescue Jet, lenders will infuse Rs 750 crore and Etihad will have to procure funding for the company either itself or through an offshore or on shore lender for a matching amount as the lenders. This is subject to board approval, regulatory clearances, and a valid creation of a pledge over not less than 34.9 per cent of the total issued equity capital of Jet Privilege Pvt Ltd (JPPL) in favour of lenders. The MoU hinges on the completion of an interim financing plan of Rs 4,000 crore, which is crucial for the airline’s survival, a source in the know said.

Even as Jet needs immediate funding to keep flying, the Etihad board met on Monday to take up the bank-led resolution plan for discussion.


 “As a minority shareholder, Etihad continues to work constructively with the Jet Airways board, management team and other stakeholders,’’ the company said in a statement after the meeting. A nod at the Etihad board meeting is critical for Jet’s rescue...Read More

Jet will re-emerge as a robust airline: Goyal, Etihad CEO in joint message

Companies News:

Jet Airways and Etihad Airways are working together on a resolution plan to make the airline robust and viable, the two airlines said in a joint statement .
The communication comes in the backdrop of lessor actions to ground planes and threats from a section of pilots to stop flying over salary delays.

“Jet Airways, its principal shareholders, including Etihad Airways, and key financial stakeholders are working towards the finalisation and subsequent implementation of the bank-led provisional resolution plan (BLPRP) to ensure the carrier emerges as a financially strong and resilient airline. The approval of the BLPRP by the board of directors of Jet Airways last week was an important step in this direction,” Jet Airways Chairman Naresh Goyal and Etihad’s Chief Executive Officer Tony Douglas said in a joint statement.

“We are confident that once the BLPRP is finalised and implemented, Jet Airways will re-emerge as a viable and robust airline to reclaim its rightful place as the airline of first choice for its customers,” it said.

The statement comes four days after the extraordinary general meeting to approve the increase in authorised share capital and conversion of debt into equity. While Goyal skipped the meeting, Etihad abstained from voting on the resolution. Etihad, which owns 24 per cent in the airline, is also laying stiff conditions to infuse fresh capital. The Abu Dhabi-based airline had earlier demanded stripping Goyal of all his powers and also wants a right of first refusal and waiver from the open offer.


 Jet Airways faces a cash crunch leading to defaults in lease and loan payments. On Saturday, the airline informed the stock exchange that lessors had forced the grounding of two additional aircraft. The airline is also negotiating the early return of some of its leased planes because of fund shortage. Meanwhile pilots are also getting impatient over salary delay...Read More

Is merging Air India and Jet Airways the way to save the sinking airlines?

Companies News:

To have one airline limping forward on the brink of bankruptcy may be regarded as a misfortune. To have two looks like carelessness.

That’s the fundamental problem for India’s aviation industry, home to the critically ill Jet Airways India Ltd. and its state-owned rival Air India Ltd., which more or less died in 2012 but has been kept on life support thanks to ongoing infusions of taxpayer cash.

Facing collapse, Jet has been trying to restructure its debt and seeking bailout money from founder Naresh Goyal and leading shareholder Etihad Airways PJSC. Should those attempts fail, Prime Minister Narendra Modi will have to explain the loss of 23,000 jobs ahead of May elections.


 Air India, known locally as the Maharajah, has been in similarly dire straits. An attempted privatization last year attracted zero expressions of interest. The government is considering a fresh turnaround plan, the Indian Express reported in September...Read More

Naresh Goyal sets terms for Rs 700-cr infusion into debt-laden Jet Airways

Companies News:

A day after Jet Airways’ foreign partner Etihad Airways told lenders that promoter Naresh Goyal must not keep more than a 22 per cent stake and that he should have no role in running the airline, the man at the centre of the controversy has hit back.

Jet founder Goyal, in a letter dated January 16, has told State Bank of India (SBI) chairman Rajnish Kumar that he was willing to infuse Rs 700 crore and also pledge all his shares in the company provided he can have at least 25 per cent stake in the airline. Goyal currently controls 51 per cent while Etihad holds 24 per cent in Jet.

ALSO READ: Lenders of debt-laden Jet Airways likely to write off up to 25% of loans


In what looks like a no-holds barred corporate battle for control and ownership between the once close partners, Goyal has pointed out in case his stake falls below 25 per cent, he would not be able to infuse fresh funds or pledge shares until the markets watchdog grants him an exemption related to the takeover cide...Read More