Mumbai: Naresh Goyal and his wife Anita Goyal agreed to step down from their respective positions in Jet Airways (India) Ltd following a marathon board meeting in Mumbai that started late on Sunday and continued till Monday afternoon. “Naresh Goyal also ceases to be the chairman of the company," Jet Airways told the exchanges on Monday.

The unprecedented move will see Goyal lose control of an airline that he founded 27 years ago. It also culminates calls from Jet Airways’ lenders, as well as its 24% stakeholder, Etihad Airways PJSC, for Goyal to step down from the chairmanship.

On Monday, a consortium of lenders led by the State Bank of India (SBI) took control of Jet Airways, promising to throw open a bidding contest for a new investor that is expected to be completed in the June quarter.

While the lenders ensured that the debt-laden airline is not grounded, it also turned out to be a face-saving exercise for the Indian economy, which is grappling to emerge out of the liquidity crunch following the crisis at Infrastructure Leasing and Financial Services Ltd. A shutdown of Jet Airways and consequent job losses would have been a political nightmare for Prime Minister Narendra Modi’s government, ahead of Lok Sabha Elections 2019.

The bidding process for Jet Airways is expected to start on 9 April and is likely to generate interest not only from domestic carriers, but also from foreign airlines. Among the contenders are India’s largest airline by market share, IndiGo (InterGlobe Aviation Ltd), and the Tata Group.

While Etihad continues to be an investor in Jet Airways, it remains to be seen if its rival, Qatar Airways, will also place a bid.

A foreign airline can hold a maximum of 49% in an Indian carrier.

Jet Airways on Monday said its promoters, Naresh Goyal and his wife Anita Goyal, also a director at the airline, and Kevin Knight, one of the two nominees of Etihad on the board, will step down.

The lenders have agreed to take a 50.5% stake in Jet Airways in order to save the airline. Meanwhile, the lenders will form an interim management at the Mumbai-based airline, which will monitor the daily cash flow and operations. Two members will also be nominated to the board.

Besides, the lenders will make a cash infusion of about 1,500 crore into Jet Airways, which is likely to take care of some of the immediate issues faced by the airline such as delay in payments to employees, lessors and others.

To read more on the Jet Airways crisis, click here.

Investors cheered the announcement, sending shares of Jet Airways to their highest in over two months. The shares closed 12.69% higher at 254.50 on the BSE.

“We see this (Goyal’s resignation) as positive for the company, as urgency of funds and (issues like) new investors wanting removal of old promoters are addressed," said Sameer Kalra, founder of Target Investing, an equity research firm.

Ajay Singh, chairman of rival SpiceJet Ltd, termed the exit of the Goyals a “sad day for Indian aviation". “This is also a wake-up call for Indian policymakers. We urgently need to address structural challenges that make India’s airlines uncompetitive to airlines around the world," he said.

SBI, the top lender to Jet Airways, is hoping that it will be able to find a new investor in about two months. “SBI Caps is handling the process. We hope to get an investor before 31 May," SBI chairman Rajnish Kumar said in an interview.

He added that an independent director would take charge of Jet Airways after the exit of Naresh Goyal. “Most likely, we are going to suggest the name of A.K. Purwar, a former SBI chairman, for the position. It’s, however, up to the board then to decide."

Jet Airways, which is facing a severe cash crunch, defaulted on a domestic loan repayment in December. Under Reserve Bank of India regulations, lenders must resolve cases of defaulting firms such as Jet Airways within 180 days of their first default.

The airline has also unpaid dues with lessors, which have subsequently taken back several planes, forcing Jet to drastically cut flights. It has a fleet of about 34 planes, a fraction of the original fleet of 119 planes.

Gopika Gopakumar in Mumbai contributed to this story.

Close