Amid debt crisis, Jet Airways' chairman and wife quit
With Jet Airways going through a crisis, chairman Naresh Goyal and his wife Anita quit the company on Monday. The company, which was founded 25 years ago, will induct two nominee directors of lenders, a statement revealed. Reports of Naresh's exit had a direct impact on Jet's shares as it witnessed a 12% jump. Meanwhile, Naresh is reported to be in London. Here's more.
Under debt of over $1bn, Jet failed to solve crisis
Naresh founded the airlines years ago but failed to steer the company out of the crisis. For months, Jet didn't pay money to vendors, including plane leasing firms. The salaries of the employees were also delayed inordinately as Jet remained buried in a debt of more than $1 billion. Last week, pilots of the cash-strapped airlines wrote to Prime Minister Narendra Modi with grievances.
Pleas to management went unheard, said pilots in letter
In the letter, the National Aviators Guild (NAG), the registered trade union of Jet Airways' Indian pilots, said the airlines was on verge of collapse, which could leave thousands of people unemployed. NAG said pilots and engineers weren't paid salaries for the last three months and all pleas to management went unheard. The body also threatened to stop flying from April 1, if dues weren't cleared by end of March.
But how did Jet land here?
Problems for Jet started with the onset of a new millennium when budget carriers flooded Indian markets. To keep up with competition, Jet reduced fares drastically. The fuel price increased but fliers refused to pay more for in-flight food and entertainment. In the last 11 years, there were only two years when Jet didn't lose money. Subsequently, it defaulted loans due by December 31.
Years ago, Etihad lend Jet a helping hand
In 2013, Abu Dhabi's Etihad Airways injected $600 million into Jet which worked as a breather. The airlines managed to clear dues and remain functional. Years later, the problem returned. This time around, a group of banks led by SBI proposed to buy 50.1 percent stake for Re. 1. But SBI proposed that Naresh, Anita, and two other directors will have to step down.
Reportedly, government wanted banks to bail out Jet
Reports claimed Centre had asked banks to bail out Jet to save it from bankruptcy. Talking about the idea, SBI Chief Rajnish Kumar said putting a full stop on Jet's services isn't a good option. Meanwhile, the lenders of the airline, led by SBI, will immediately infuse about Rs.1,500 crore into Jet Airways by way of "issue of debt instruments against security of assets".
