Year of reckoning for India Inc: Jet Airways lost over Rs 25 bn in H1FY19

Jet Airways
Jet Airways and Etihad are back to the negotiating table five years after their deal, which gave Jet much-needed funds and the Gulf airline access to the Indian market. With Jet facing turbulence —it has lost over Rs 25 billion in the first half of FY19, delayed salaries and vendor payments and has large loan repayments due —its founder Chairman Naresh Goyal has tapped his strategic partner in Abu Dhabi for a bailout.

A deal between Jet and Etihad now looks likely but depends on Goyal ceding control over the airline he founded 25 years ago.

Goyal reached out to Etihad after discussions with the Tata group for an equity infusion in the airline made no headway. The Tatas reportedly imposed onerous conditions that Goyal was unwilling to accept. Private equity funds, too, showed initial interest but backed out. Pushed to the wall, Goyal flew to Abu Dhabi last month. 

Jet and Etihad have a long association, which dates much before the 2013 strategic partnership. Jet helped in the formation of Etihad in 2003 and the two had a code share partnership before signing a Rs 20.60 billion equity deal — the first after foreign direct investment (FDI) norms in aviation were relaxed.

Relations between the two, however, turned cold over the past several months. While Goyal was courting new friends in Air France-KLM and Delta, Etihad’s investment strategy was floundering. There were occasional reports of Etihad exiting its India investment too, which the Gulf airline has denied.

Now the Abu Dhabi-based airline is looking for a much larger role in running Jet. Goyal owns 51 per cent while Etihad holds 24 per cent. It has room to increase its stake up to 49 per cent under FDI norms.

Various options are being considered including Etihad increasing its stake up to to the permissible limit, roping in an Indian partner and so on. Talks have been held with State Bank of India for a debt-to-equity conversion, which would see the lender picking up a significant minority stake.

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