Story Of The Week


Last Monday, Jet Airways promoter and Chairman Naresh Goyal, who founded the company 27 years ago, stepped down from his position after the banks took control over the aviation company. He owned 51% stake in the company. One of the nominees of ETIHAD airways, which owns a stake of 24% in the company, also stepped down. Jet owes debt of over $ 1 billion to the SBI led consortium of banks.  On March 25, this SBI led consortium of lenders obtained control over the company. The news spread like a fire in a farm and the effect of this event was evident on the market. The market derived high expectations from this move which was followed by several announcements. The couple Naresh Goyal and Anjali Goyal have halved their stakes from 51% to 25.5%. This gives a green signal to the resolution process to be carried out against Jet Airways. The aviation ministry declared that there will be no more grounding of planes. The employees, whose salaries were due, are expected to be paid in the due course of time. SBI infused a sum of Rs. 1500 crore towards the revival of the operations of the company and as working capital fund.  Various other factors which include addition of more aircrafts to the fleet, created positive sentiments in the market and the stock price of Jet Airways rose about 13% on Wednesday. This was a 10 week high where we saw the stock price of the aviation giant to crash by 56% last year. Revival of Jet Airways has a very important political significance too as it’s the time for the new government to be formed. The case due to the reasons instigates curiosity in one’s mind. It is thus important to delve into intricacies.


Let’s delve into the timeline of events and see a broader picture to figure out how things have unfolded for Jet in the recent period.

March 2018

Jet Airways books a loss of Rs. 1036 crore in Jan- Mar quarter. The revenues declined and the costs increased significantly.

August 2018

It introduced 25% pay cut for employees. The loss figure went to Rs.1323 crore for the April- June 2018 period.

September 2018

No more free meals in Economy class. The Airways started cutting their costs where the first move was to stop the system of free meals in the economy class

October 2018

Employees Sacked. In its efforts to reduce costs, the airways laid off 20 employees which even included some of the senior level executives from in flight service department. It also asked some of the managerial level employees to leave the company from departments like engineering, security and sales.

November 2018

16 more employees were sacked.

December 2018

The loss for the third quarter of the FY 2018-19 stood at Rs. 588 crore. A decrease in loss was observed because of the various measures invoked by the airways in the preceding months.

January 2019

Qatar Airways was interested in diversifying its portfolio outside its home market. However it refused to purchase a stake in Jet Airways reason being Etihad Airways holding a stake in Jet as the owner of Etihad Airways. Abu Dhabhi and Qatar are deemed to not get along.

February 2019

February was one of the most important months for the Jet Airways as far as the timeline of events is concerned.

Lessors pull out planes. International lessors grounded more Jet Airways planes with the skepticism over the on time payment and clearing of dues by the Jet. At the same time 9 of the jet airways aircrafts were grounded which rose from 5 as compared to the last month.

The shareholder’s approved a plan where the existing debt will be converted into equity. This move would give lenders a stake in the company paving way for company’s lenders to infuse funds and nominate director of board. Lenders would now have a bigger shareholding in the company than any other shareholder.

Mr. Naresh Goyal agreed to step down from the position this very month. A meeting was thus called upon where Goyal and other lenders were present with the agenda of discussing the way forward.

March 2019

On March 11, 2019 Mr. Naresh Goyal expressed requirement of urgent funding worth Rs. 750 crore from his equity partner Etihad Airways. The reason for this was the irrational cash flows generated and inability to meet the working capital requirement for carrying on the operations of the company. This was the effect of grounding of 50 airplanes from its fleet.

This was followed by stepping down of the Chairman Naresh Goyal and reduction in his stake.

Indeed, this year has been strenuous for this aviation company which once was the biggest in its domain

What led to this situation?

With all this happening, it is obvious to have a question “What actually led to the downfall and worsening of the situation of well-renowned Jet Airways”. Let’s see what analysts have to say.

Rise in prices of oil globally in the past months, is considered to be a major factor contributing to the downfall, as it increased the cost of Aviation Turbine Fuel for the airline significantly. The Jet Airways followed the low cost model for its customers and thus the increase in the expenses on fuel was not transferred to the customers. Low cost models involve offering high discount on the tickets for attracting more customers and thus the prices become highly competitive in aviation sector. As a result a significant increase in operational cost is followed by absolutely no change in revenue.

With its high international presence, a weaker rupee in the last months is also considered to be one of the reasons for the crisis. Further, the airways had to put a full stop to its operations on Gulf routes because of low finances. The trajectory started going down. The bottom line and top line shrinked. One by one, the circumstances went against jet airways and what we have today is, a debt laden airways fighting hard for its survival and putting efforts for revival.


The lenders of Jet Airways are now on a plan to hire SBI Capital Markets to assist them in the process of finding new and suitable investor for the airlines. The lenders will not hold the stake in the company for a longer duration and have declared to sell it by June 2019. The process of debt to equity conversion will also be carried out so that lenders own a majority stake in the company till time being. The rescue deal and revival plan is set to be rolled. It will be worth figuring out how efficiently it brings on board the desirable outcomes.

With elections coming up, revival of Jet Airways would leave a strong impact thus, fetching vote bank for the present government.



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