Jet Airways founder Naresh Goyal and his wife Anita Goyal on Monday stepped down from the cash-strapped airline’s board. In anticipation of their exit, the Jet Airways shares surged as much as 3.87 per cent to hit an intraday high of Rs. 234.80 on the NSE in afternoon trade while it climbed 4.23 per cent to Rs. 235.40 on the BSE, even as the NSE Nifty 50 and S&P BSE Sensex indexes, which were both trading around 1 per cent lower.
Why is the market celebrating?
Even though Jet is not the only airline to bear the brunt of macro factors such as high fuel prices and a depreciating rupee, analysts say the carrier’s high debt levels and failure to raise fresh funds have landed it in trouble. Though the airline has attempted to rein in its costs over the past few quarters, the broader market view is that the airline’s survival rests on whether it finds a new investor.
The airline has been weighed down by the seeming reluctance of Goyal to exit in order to enable either its partner, Etihad, or a potential investor to gain control based on a resolution plan finalised by the SBI-led lenders.
Saddled with more than $1 billion of debt, Jet has postponed payments to banks, pilots and lessors. Aviation regulator DGCA has said that only 41 Jet Airways aircraft are currently available for operation, bringing down the fleet strength to less than half. Late last week, Jet Airways’ pilots threatened to stop flying from April 1 if the airline did not come up with a rescue plan in place by March 31.
So, Goyal’s stepping down is being seen as the first step in the resolution of the Jet crisis given that any of the potential new investors have set Goyal’s relinquishment of control as a pre-condition to pumping money in the ailing airline to keep it afloat.