Mumbai: The board of Etihad Airways PJSC will meet 31 March to take a final decision on whether the Abu Dhabi-based carrier should make a fresh investment in Jet Airways (India) Ltd or exit the ailing airline, two people directly aware of the development said.
Etihad’s chief executive, Tony Douglas, who met State Bank of India (SBI) chairman Rajnish Kumar in Mumbai on 18 March, has sought a term sheet from Indian lenders, which require them to buy Etihad’s 24% stake in Jet Airways if the UAE airline decides to sell. Alternatively, Etihad will make fresh investments in the Mumbai-based carrier only after the lenders agree to fulfil specific conditions.
“Etihad has laid down certain conditions, which includes removal of the Naresh Goyal group from the board altogether," one of the two people cited earlier said on condition of anonymity. The airline has also sought a guarantee from the lenders for offering more credit to Jet Airways after the equity infusion, the person added.
“Etihad hopes that the lenders will be able to address all these issues before the board meeting later this month," the second person said, requesting anonymity. “Etihad has also sought a ‘put option’ through which it can sell its entire stake to the lenders (led by SBI) if it is not happy with the revised resolution plan."
Under the “put option", the seller gets the right but not the obligation to sell assets at an agreed price on or before a particular date. During his meeting with the SBI chief, Douglas offered to sell Etihad’s 24% stake to the state-run lender at ₹150 per share, or about ₹400 crore for the full stake.
The development comes after weeks of negotiation between the two sides. Etihad was on the verge of making more investments in cash-strapped Jet Airways, but later dropped the plan. “Etihad is of the view that the lenders have been rather soft on Goyal by allowing him to retain the clawback option in the airline," the second person said.
The board of Jet Airways has called a meeting in London late on Sunday to discuss the issue of resignation of the promoters, a third person said, requesting anonymity.
Founder and chairman Naresh Goyal owns a 51% stake in Jet Airways, along with his wife, Anita, who is also on the airline’s board.
Jet Airways and SBI did not respond to queries till the time of publishing this story.
“As a minority shareholder, Etihad is working closely with Indian lenders, the company and key stakeholders to facilitate a solution for Jet Airways," a spokesperson for Etihad said.
Mint reported on 15 March that the board of Etihad was not prepared to meet the bailout terms for Jet Airways proposed by a consortium of lenders led by SBI, as the UAE airline did not agree with Goyal’s demand for removal of the perpetuity clause that caps his shareholding at 22%. Etihad is also against Goyal’s proposal to nominate two directors on the airline’s board.
Jet Airways, which is facing a severe cash crunch, defaulted on a domestic loan repayment in December. According to Reserve Bank of India (RBI) regulations, lenders must resolve cases pertaining to defaulting companies such as Jet Airways within 180 days of their first default.
The airline has not paid salaries to a section of its employees, including pilots. It has also not cleared dues to lessors for the past few months.
Lessors have subsequently taken back Jet’s aircraft, forcing Jet Airways to drastically scale down operations this month.
Pilots of Jet Airways have also threatened strike from 1 April unless the airline signs a letter of intent to pay their salary dues.
Amrit Raj in Mumbai contributed to this story.