BackJet Airways needs to cut costs, Naresh Goyal warns employees
Warning comes after Jet posts record loss; airline's chief commercial officer Sudheer Raghavan exits
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New Delhi: Jet Airways (India) Ltd chairman Naresh Goyal has warned employees that the airline needs to cut costs as it combines its network with that of Abu-Dhabi-based Etihad Airways PJSC, which has bought a 24% stake in Jet.
The warning comes after Jet announced a record loss of nearly ₹ 1,000 crore in the September quarter and analysts said that a major part of the infusion from Etihad may have been wiped out.
The deal was worth $900 million (around ₹ 5,616 crore today)—$379 million in equity in the airline, $150 million in equity in Jet Airways’ frequent flyer programme, $70 million from the sale and leaseback of three pairs of Heathrow airport slots and $300 in million debt financing.
“The months ahead will be critical and we would need to work as a team to deliver strong commercial, operational and financial benefits for all our stakeholders, by creating operational synergies, rationalizing costs and expanding the footprint of our international network," Naresh Goyal wrote to employees on 20 November, announcing the formal closure of Etihad’s stake purchase. Mint has reviewed a copy of the message.
Jet, which will soon have to compete in India with Singapore Airlines and AirAsia’s local units, declined to comment on Goyal’s letter.
Jet, which operates 113 aircraft to 76 destinations, has been the first existing airline to benefit from the government’s decision in September 2012 to allow foreign airlines to invest as much as 49% in local airlines.
Goyal said Etihad representatives James Hogan and James Rigney have joined Jet Airways’ Board and their “vast expertise and immense experience, will further enhance the performance of Jet Airways and equip it to surmount any challenge that may come its way".
Some of Jet’s existing senior employees are, however, quitting.
“My six-year journey with Jet will end in two days," the airline’s chief commercial officer Sudheer Raghavan said in an email to employees on 27 November. “It takes a resilient team like all in Jet to just keep going despite the massive challenges we faced in the past few years. We ran the dark gauntlet, but I see light ahead."
“God bless Jet Airways and guide it on its journey to regain its old glory. It has the DNA to survive and succeed," Raghavan said.
Raghavan said he plans “to take a few months off to do a few things I have been putting off and then I’ll hit the job market again". Mint has reviewed a copy of the message.
Raghavan was instrumental in building Jet’s route network in recent years and was also the spokesperson for the airline on many public forums.
Jet’s CEO and chief financial officer had quit earlier this year after Etihad moved in.
In his email, Goyal said together with Etihad Airways, Jet will enhance connectivity “through the gateway cities of Mumbai and New Delhi, and, progressively, through other regional gateways across India".
The airline is likely to align and feed Etihad’s hub at Abu Dhabi, analysts have said.
An analyst said Goyal’s mail was required to prepare employees for changes. “First, now that all approvals have been received, a formal announcement to the employees was needed. Perhaps in not so pompous language, but needed nevertheless," said Jet’s former CEO Steve Forte, adding, “Secondly, reading between the lines, the message is preparing the employees to upcoming changes both in management, organization and work ethics/standards, etc."
He said Jet will most likely be an Etihad-controlled airline now. “If Etihad has it its way, there will be several changes in management and they will run the airline. I see it as a positive trend," he said.
Jet’s stock fell 0.09% to ₹ 294.05 on BSE, while the exchange’s benchmark Sensex gained 0.56% to close at 20,534.91 points.
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