State Bank of India asked Jet AirwaysNSE -4.67 % chairman Naresh Goyal and three fellow directors to step down from the board of the airline as it edged closer to the brink with more planes likely to be grounded due to lease rental defaults, said people with knowledge of the matter. The lead lender, which insisted that keeping the struggling airline afloat was vital, also signalled it was unlikely to pick up the 24% stake belonging to Etihad in Jet.
The airline can turn around quickly if it gets an infusion of cash, said a senior government official. “The fundamentals of the airline are intact and it only needs funding to revive,” he said.
The carrier’s troubles mounted as dues against payments owed to passengers due to cancelled flights ballooned to about Rs 3,500 crore. Jet is down to operating 150 flights a day from 450 at full capacity, with a third of its fleet grounded due to defaults on lease payments. It’s currently down to 35 planes from 119 with more at risk of being grounded as it’s unable to pay lessors, said the people.
Forcing Jet Airways to go out of business would be the “last option” and lenders are making every effort to keep the airline flying, SBINSE 0.25 % chairman Rajnish Kumar said on Wednesday. “We believe that it is in everybody’s interest that Jet Airways continues to fly,” Kumar said in New Delhi after a meeting with government officials.
The bank has asked Goyal, his wife Anita Goyal, executive director Gaurang Shetty and independent director Nasim Zaidi to step down from the board, said the people. That’s in line with the memorandum of understanding (MoU) on a rescue plan that involved Etihad and lenders infusing more funds.
Wants Fresh Equity Investment
But on Tuesday, ET reported that Etihad asked SBI to buy its 24% because it wanted to exit the carrier, possibly following Goyal’s reluctance to step down from the board, give up his role as promoter or agree to a permanent cap on his shareholding at 22% versus 51% now.
SBI, Etihad and Jet Airways didn’t respond to queries.
Under the MoU that had been agreed to by Etihad, lenders and Goyal, the latter would be allowed to nominate two members to the board except for himself and his wife. The MoU was, however, subsequently disavowed by Goyal, who wanted the clause that limited his maximum stake at 22% to be diluted, leaving open the chance that he could stage a return in the future.
SBI is unlikely to accept Etihad’s 24% stake and is in favour of fresh equity investment in Jet before embarking on any loan restructuring, said the people cited above. Meanwhile, the government is said to have urged state-run banks led by SBI to convert debt into equity to rescue the airline. The lenders are reluctant to do so, said people with knowledge of the matter.
Senior bankers told ET that lenders can buy shares in any company subject to a 30% limit. “But investing in Jet at this juncture does not look prudent,” one of them said.
Ticket refunds are another concern. “This refund against cancellations is suddenly becoming a big problem for the airline and a concern for lenders and investors too,” said one of the persons cited above.