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SBI asks Naresh Goyal, his wife, two directors to step down from Jet Airways board as airline's financial woes deepen

BusinessToday.In     March 21, 2019

It may soon be an end of the road for cash-strapped Jet Airways, as it fails to come out of the existing financial crises. After reports that Etihad was more interested in exiting the company than helping it revive, state-owned State Bank of India (SBI) has now said it would be in everybody's interest that Jet Airways continues to fly. The bank has asked Naresh Goyal and three other company directors to step down from the Jet Airways board. SBI has, however, not shown much enthusiasm in buying 24 per cent stake reportedly offered by Jet's UAE-based partner Etihad. The Gulf carrier, a jittery participant in recent bailout discussions, signalled its decision to exit Jet after a meeting between its CEO Tony Douglas and SBI Chief Rajnish Kumar.

The Bank-led Resolution Plan (BLRP), approved by Jet's shareholders in February, is being piloted by SBI. Despite deep financial crunch and its declining fleet of aircraft, the airline can be brought back into life provided instant cash is pumped into it, said a government official, as quoted in the Economic Times. While the SBI is bending the RBI rules to save the troubled Jet Airways, its efforts can only fructify if Naresh Goyal agrees to accept the terms and conditions put forth by the bank. So as per the Memorandum of Understanding (MoU) between Jet, lenders and Ehitad, Naresh Goyal along with his wife Anita Goyal, Executive Director Gaurang Shetty and Independent Director Nasim Zaidi will need to quit the Jet Airways board to become eligible for fresh funding. However, if Goyal sticks to his earlier stance of leaving an option open for making a comeback in future, the matter will complicate further as non-payment of salaries and rental for lessors are becoming a continuous headache for Jet.

Resolution for Jet Airways is futile; send it for insolvency

If the situation persists, the company is staring at another payment default of $109 million by March 28. Jet Airways has to pay $109 million of total $140 million loan it had taken from HSBC Bank Middle East, in which Etihad was a guarantor. Jet had also defaulted on its earlier payment of $31 million to HSBC as part of its external commercial borrowings. With the SBI-led resolution plan yet to see the light of the day, Jet Airways is likely to default to another tranche.

Though experts suggest filing for bankruptcy would be a lasting solution of Jet Airways' woes, many also believe the government would unlikely allow this to happen at a time when the General Elections 2019 are around the corner. Jet going for bankruptcy would mean thousands of job losses, and it would send the aviation sector into a tailspin. For an election-bound government, saving Jet is crucial because no government would want a trained workforce of 16,000-odd people to lose jobs overnight, they believe.

Jet Airways engineers' union flags flight safety concerns; Suresh Prabhu calls for emergency meetings

The harried pilots of Jet Airways are approaching rival airlines like SpiceJet and IndiGo for employment. Jet Airways pilots had earlier been wooed by IndiGo with compensation for their pending salaries and other benefits, leading to murmurs of protests from its own pilots. The salaries of Jet Airways pilots, engineers and senior officials have been pending for over three months now. They have warned they will stop flying from April 1 if the management failed to provide clarity on the revival plan along with a deadline to clear their salary dues by March 31.

The Naresh Goyal-led company owes over Rs 8,500 to a consortium of banks led by the SBI. The troubles for the airline started last year when its pending payments due to cancelled flights swelled up to Rs 3,500 crore. Since then there has been a continuous delay in disbursement of its employees' salaries, and the airline's fleet has also reduced to 35 from 119 due to the non-payment of rentals to lessors. Jet Airways now operates 150 flights a day, a sharp decline from 450 when it used to fly with full capacity.

Edited by Manoj Sharma

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