Arun Shourie was probably right on Jet Airways' Naresh Goyal

The industry lobby’s in-house aviation panel, Shourie told the gathering, had demanded that foreign investors in Air India, which the government was trying to privatise, should not hold more than 25% equity. Why? This was more than what was allowed in China, Mexico, the UK, Thailand, Taiwan and the US, the letter said. 

The Indian Express, a newspaper Shourie had earlier been the editor of, reported a telling comment that was later quoted by others such as Sucheta Dalal: “Shourie then read out the recommendations of several parliamentarians, as well as those of the Standing Committee of Parliament. Lo and behold, they were the same as FICCI's, right down to the etceteras."

Shourie asked his audience if it was a case of “Great minds that think alike? Or one great mind that was making everyone think alike?" Clearly it was the latter--Shourie informed the audience that FICCI’s aviation committee was chaired by none other than Naresh Goyal of Jet Airways, who had a vested interest in ensuring that foreign airlines did not control Air India (probably because it could result in serious competition for Jet). 

Shourie later narrated the incident in Parliament, when he also referred to Goyal as the “so-called" owner of Jet Airways. He also told Parliament he wasn’t sure even as a minister whether Jet Airways was foreign owned or Indian owned.

The carrier was suspected to have links with underworld dons like Dawood Ibrahim and Chhota Shakeel, something the now-defunct airline has denied consistently. A report in The Economic Times mentions that India’s external intelligence agency, RAW, had written to the home ministry in 2001 about large dubious investments in Jet by gulf sheikhs, the underworld and by smugglers. 

A probe into the airline’s funding to ascertain if the underworld had invested in it had been ordered by the government. In 2002, the Intelligence Bureau gave adverse inputs about large dubious investments in the airline in writing to the Home Ministry, according to a report in The Economic Times.

Then home minister L.K. Advani referred the matter to the then company affairs minister Arun Jaitley. The department of company affairs, reported The Economic Times, said it had no way of finding out who the real owner of Jet Airways is, given, as per government records, Jet Airways was owned by Tailwinds Ltd, which was fully owned by Naresh Goyal, a non-resident Indian, and which was registered in the Isle of Mann, a black hole as far as information of the nature required is concerned. 

With the government’s efforts to ascertain the true ownership of the airlines hitting the wall of opacity that the Isle of Mann is, the security clearance was granted in 2004 by the Union home ministry on the recommendation of the department of company affairs.

Things came full circle last week, with the Enforcement Directorate releasing a statement saying that it has attached in London, Dubai and India assets worth ₹538 crore of Goyal, his family members and companies as part of a money laundering investigation linked to an alleged bank loan fraud. Goyal is in judicial custody and lodged in Mumbai's Arthur Road jail. He was arrested by the ED on 1 September. 

How different would India’s aviation market have been today had the Vajpayee government acted on disinvestment minister Arun Shourie’s worries rather than company affairs minister Arun Jaitley’s helplessness?

Goyal, an airline ticketing agency operator in the 1980s, started one of India’s first private airlines after India liberalized its economy in 1991. Jet Airways commenced operations in 1993. Rival East-West Airlines, which was launched in 1992, collapsed after its promoter Thakiyudeen Wahid was shot dead in 1995. 

Facing little private competition, Goyal built Jet into an efficient airline modelled after Singapore Airlines. He listed it in 2005, the year he bagged international flying rights. Importantly, Goyal’s Jet Airways always seemed to bag the best flight departure and arrival time slots, aircraft parking bays, and lucrative bilateral rights to fly international routes. Remarkably, at its every milestone, the country’s aviation regulations appeared to turn favourable for the airline, almost as if magically. 

Soon after, though, things started to turn sour for Goyal and Jet. To ward off competition from Vijay Mallya’s (also now defunct) Kingfisher Airlines, he acquired Air Sahara in 2006 for $500 million, rebranding it as low-cost JetLite. The deal didn’t deliver the goods. 

Then, high oil prices after the 2008 financial crisis plunged the airline into losses despite deep cost cuts, including an attempt to lay off 1,900 employees in one go (an attempt that he had to withdraw following a public furore). 

A 24% stake sale to Etihad in 2012 after the government liberalized its FDI policy also could not keep Jet afloat against the stiff competition from low-cost carriers such as IndiGo, SpiceJet and GoAir.

Jet's debt burden ran up continuously until a depreciating rupee and high oil prices in 2017 proved unsurmountable. The airline was completely out of cash by 2019. It had to be grounded after banks refused new loans to bail it out.

Goyal finally stepped down as chairman of Jet in March 2019, pushed by Rajnish Kumar, then chairman of State Bank of India, which led a consortium of lenders to whom the airline owed around ₹8,000 crore. In July 2019, Jet Airways filed for insolvency in the NCLT Mumbai bench. Since then the case has seen several twists and turns, but that is a different story for another time. 

The important lesson in Jet’s gravity-defying rise and crash is that complete clarity on financial background, and potential links to opaque tax havens are red flags that should not be sidestepped. 

If the government had paid heed to Shourie's concerns, the Jet Airways debacle would clearly have been avoided. What's more, the aviation market would probably have been healthier, more competitive, and Air India’s privatisation may have got completed 15 years sooner.