MUMBAI – A group of lenders led by the State Bank of India have taken full control of Jet Airways, promising to throw open a bidding contest for a new investor.
According to Hindustan Times the development comes soon after the resignation of the airline’s chairman Mr. Naresh Goyal.
On Monday, March 25, Mr. Goyal bowed to mounting pressure from creditors as the airline he founded 25 years ago sunk to the margins of bankruptcy with thousands of jobs at stake.
Mr. Goyal is a former ticketing agent who went on to build one of India’s biggest airlines. His resignation marks a rare ceding of control of a prominent corporate promoter in the giant Asian economy.
Mr. Goyal’s decision came during a marathon board meeting that began late on Sunday, March 24 and ended Monday afternoon. Following Mr. Goyal are his wife Anita, and Etihad Airways nominee, director Kevin Knight, who also quit the board.
Role of banks
The banks are expected to provide a cash infusion into the operations of the carrier to take care of some of immediate payments such as delayed salaries. Saddled with a heavy debt, Jet has been on the brink of collapse, and had to ground flights as it struggled to pay lenders, suppliers, pilots and leasing companies.
Union Finance minister Arun Jaitley, said Monday, March 25: “The self-interest of the banking system is that the company must survive so that their investment remains and when it prospers they can get back their monies,” adding: “They have kept public interest in mind because India needs more airlines, more aircraft. Creditors have kept both these considerations in mind.”
The bidding process for Jet Airways is expected to start on April 9 and is likely to generate interest not only from domestic carriers but also from foreign airlines. Among the contenders are India’s largest airline by market share, IndiGo and the Tata Group. The process is expected to be completed in the June quarter.
While Etihad continues to be an investor in Jet, it remains to be seen if its rival Qatar Airways will also place a bid. To be sure, a foreign airline can hold a maximum of 49% in an Indian carrier.
New stake for lenders
Hindustan Times reports that the lenders have agreed to take a 50.5% stake in Jet Airways in order to save the airline and will form an interim management, which will monitor the daily cash flow and operations.