The owner of Jet Airways is reportedly trying to secure a rescue deal with partner Etihad to avoid losing control of his struggling airline
- Goyal is reportedly trying to secure a deal with his partner
Etihad Airwaysthat will allow him retain a minority stake in Jet.
- The potential deal could see Goyal and his family dilute their 51% stake in the
airlinewhile Etihad Airways increases its holding from 24% to 49%.
- An outright purchase of
Jet Airwaysby Tata Sons, which wants Goyal to cede complete control, is likely stalled for the time being owing to the airline’s high debts and reputational issues.
Naresh Goyal, the owner of Jet Airways, isn’t going down without a fight. As Tata Sons cautiously assesses a plan to take control of the failing airline with an outright purchase, Goyal is reportedly trying to secure a deal with his partner Etihad Airways that will see him retain a minority stake in Jet, according to the Economic Times.
The deal, currently in negotiations, could see Goyal and his family reduce their stake in the airline from 51% to 15%, while Etihad Airways increases its holding from 24% to 49% following the infusion of fresh equity and debt financing. The move might be a necessary one for Etihad. If Jet Airways doesn’t get new funds, then Etihad’s entire investment might be in jeopardy and it could lose an important client base -- Indians travelling overseas.
Goyal’s ultimate aim is to continue as the chairman of Jet Airways so he can oversee its turnaround. One of the key conditions of Tata’s potential acquisition was that Goyal completely sell his stake in the airline.
However, the purchase by Tata is likely stalled for the time being, sources told the Business Standard last week. That is said to be due to the airline’s significant external debts, estimated at ₹84 billion at the end of September 2018, as well as the fact that its reputation has taken a hit in the last few years.
In October, ICRA, a ratings agency, downgraded Jet Airways’s long-term credit rating from BB to B, citing the airline’s increasingly dire financial situation and its inability to service its debt obligations. Earlier this month, the airline reported its third consecutive quarterly loss, at ₹1.3 billion, citing high fuel costs and low ticket prices.
However, Tata’s wait-and-watch approach will likely be a breather as well as a headache for Goyal. While he doesn’t want to cede ownership, he is desperately in need of fresh financing to restructure the airline’s operations and prevent a potential bankruptcy.
In the short term, Jet Airways is instituting a number of changes to stay afloat. Earlier this week, it decided to revoke complimentary access to its lounge services for economy passengers that are enrolled in its platinum and gold loyalty programmes. The airline is also planning to sell a 49.9% stake in Jet Privilege, its frequent flyer programme.
Indian conglomerate Tata is in talks to buy out troubled carrier Jet Airways in a deal that could create one of the country's largest airlines
India’s largest passenger airline just posted its first ever quarterly loss since going public — and its results reflect the larger woes of the country’s aviation sector Jet Airways has a plan to stave off a potential bankruptcy