Mumbai: At an annual general meeting earlier this month in Mumbai, Jet Airways (India) Ltd’s founder and chairman Naresh Goyal apologised to his company’s shareholders who lost money, while listing out several steps to improve growth and corporate governance. The airline subsequently deferred announcing its June quarter (Q1) results to 27 August.

The carrier will have to punch above its weight when Goyal and other directors meet later today to discuss cost-cutting steps and ways to turnaround its financial woes.

Indian airlines have been hammered by higher jet fuel prices, a weaker rupee and intense competition, restricting its ability to raise fares to cover higher costs. While the aviation sector faces headwinds, Jet Airways, which is essentially a full-service carrier, also faces stiff competition from no-frill carriers, which operate on a comparatively lower cost model. Jet Airways shares have lost more than half of their value in the past year, according to BSE data.

“We were scared about our future with the airline when the management asked us to consider pay cuts," said a pilot with Jet Airways, on the condition of anonymity. The pilot was referring to one of the steps planned by Jet Airways to cut costs and conveyed to employees earlier in August. “However, we understand that the management is working hard to turn around the finances and bring down costs."

When asked about the airline’s turnaround plan, a Jet Airways spokesperson in an email said: “We are unable to share specifics prior to review by the company’s board of directors. Jet Airways is well on track to achieve the committed 12%-15% reduction in its non-fuel CASK in the next 8-10 quarters."

“In line with its endeavour to reduce debt gradually and deleverage the business, the airline has reduced its overall debt by an amount of 3000 crores in the last three years," the spokesperson added.

Goyal did not respond to emailed queries about the turnaround plan.

Jet Airways had net debt of 8,082.65 crore as on March-end, according to its annual report. Its costs are also high, accentuated by a recent rally in fuel prices and the cost of debt servicing.

“Jet’s cost structure/debt levels have improved, but it needs to do more because of intense competition in the industry," SBI Cap Securities said in a 16 July report. Jet Airways plans to cut non-fuel costs by 12-15% in the coming quarters.

Goyal, who owns a 51% stake in Jet Airways, has in the past steered his airline through difficult situations.

In 2013, when Jet Airways was battling with higher costs, Goyal managed to get Abu Dhabi-based Etihad Airways take a 24% stake for 2,050 crore.

In the recent past, Jet Airways signed an enhanced cooperation pact with Air France-KLM, expanding its opportunities in Europe and North America.

Goyal built Jet Airways from scratch. For over two and a half decades, since 1992, he kept the carrier afloat while many of its contemporaries shut shop.

The rules of the game have, however, changed with no frill carriers with lower cost structure and deeper pockets like IndiGo (InterGlobe Aviation Ltd) and SpiceJet Ltd ruling the domestic skies, and competition from full-service airlines like Tata-Singapore Airlines’ Vistara and state-owned Air India.

“Jet Airways needs cash infusion urgently to take care of its debt, debt servicing and other payments," said an executive of a rival airline, who didn’t want to be named. “Also, Mr Goyal would not like to lose his control over the airline. He will definitely try to come up with something to save his airline," the person added.

Jet Airways has been linked to several potential fundraising plans. Mint had on 3 August reported that Jet Airways has approached investment bankers again to help sell a stake in the carrier.

On 20 August, Mint said Jet Airways is seeking to sell a stake in the Jet Privilege frequent-flier programme to raise cash for its loan repayment obligations and also for operational needs. The airline has however refuted these reports.

Jet Airways informed stock exchanges last week that its board will discuss the cost-cutting steps and turnaround initiatives at a meeting on 27 August. The meeting will also consider the deferred Q1 results.

“Braving the worse in the midst of political and policy uncertainty whilst at the same time constantly ensuring that operating costs, quality and a unique product is positioned in the marketplace sums up Naresh Goyal’s strategy; and that clearly has worked," said Mark Martin, founder and CEO of UAE-based aviation consultancy Martin Consulting LLC.

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