Moneycontrol
Last Updated : Mar 01, 2019 03:38 PM IST | Source: Moneycontrol.com

Profile | 'The great survivor' Naresh Goyal throws in the towel

Financial crises and allegations of dubious funding and muscling out competitors -- Naresh Goyal weathered it all. Nearly.

Vaibhavi Khanwalkar @vaiitoh
Nazim Khan @nazim2803

News emerged yesterday that Naresh Goyal, founder of Jet Airways, has agreed to step down as chairman. The airline industry veteran finally saw the writing on the wall: he will have to step aside if he wants investors to bail out his beleaguered carrier.

Since Goyal set up Jet Airways 25 years ago, he has weathered many storms of the aviation industry — each of which got worse the next time there was inclement weather. Some put it down to his impeccable negotiation skills.

As Goyal's innings at Jet appears to come to an end – the news is not yet confirmed – here's his powerful back story.

The journey

Goyal's foray into the travel business was by way of a ticketing agency in the 80s. He, however, dreamed big. As India liberalized its economy and its skies, he decided he would launch India's first private airline. He was beaten to the punch by Thakiyudeen Wahid, who launched East-West Airlines in 1992. Jet Airways commenced operations in 1993.

What followed was a tumultuous relationship between the rival carriers, which saw charges being traded and accusations of dubious funding levelled at each other.

However, Wahid's carrier collapsed after he was shot dead in 1995 and the airline succumbed to its debt, ceasing all operations in 1996. The theory: Wahid was bumped off by gangster Chhota Rajan as his airline was funded by the rival D-Company.

Jet could have a free run now. It became India's premier airlines, modelling itself after Singapore Airlines – with best-in-the-industry planes, food, livery etc.

But about half a decade later, the D-Company theory was put to the test as Goyal himself came under the scanner over alleged links to Dawood Ibrahim and Chhota Shakeel.

In 2002, the IB said that the airline had received large, questionable investments from Gulf countries and laid out his connections with the two underworld dons. The airline dismissed these allegations as baseless.

Goyal is believed to have navigated the troubled waters then, thanks partly to his political connections, and despite a long-running feud with the then divestment minister Arun Shourie who called him the "so-called owner" of Jet Airways.

It was fairly smooth sailing after that as Jet soon gained a majority market share, with Goyal earning the sobriquet ‘The King of Air’.

Around the same time, liquor baron Vijay Mallya's Kingfisher Airlines (now defunct) came into existence.

To protect its position in the market, Jet acquired minor rival Air Sahara in a deal valued at $500 million, which later became low-cost sub-brand JetLite. The deal backfired as the complications of operating two airlines of completely different models, combined with high oil prices took a toll.

The 2008 financial crisis proved particularly severe for Jet, with the company's market cap falling to a low of Rs 800 crore.

Goyal pulled through this, cutting costs sharply, and even attempted to lay off 1,900 employees in one go. (Following a public furore, he apologised to the sacked staff and asked them to report to work again.)

He inked a code-sharing pact with Etihad, a relationship that would deepen in in September 2012, when the latter picked up 24 percent in the carrier after the government liberalized its FDI policy.

In between, news continued to emerge about Goyal's political connections and the way he used them. Such as when it emerged that Goyal may have scuppered the Tatas' plan to form a joint venture with Singapore Airlines in the early 90s – an allegation he denied. (Decades later, Tata and SIA would come together to form Vistara.)

Beginning of the end

Etihad's stake buy in Jet provided interim relief but Jet’s market had fully turned against it as low-cost carriers such as IndiGo, SpiceJet and GoAir continued to acquire market share.

Jet's debt burden continued to pile up between 2014 and 2017, with the company going into a tailspin last year as the impact of high oil prices and a depreciating rupee hit home.

With not enough money left to pay staff salaries, Naresh Goyal faced a stark challenge. It needed to raise money through stake sales even as if that would mean his hold on the airline weakens.

Reports said a round of discussions began with various parties, including Tatas, who made it clear they will be interested in buying a stake but only if Naresh Goyal steps down.

The last straw was when Etihad, which had backed Goyal several times in the past, offered the same deal.

Left with no choice, Goyal may have decided to step down, bloodied and weary from one battle too many fought over the course of 25 years. But even as he goes, he will be remembered as the classic first-generation entrepreneur who epitomises Indian capitalism – in all its glory and rough edges.
First Published on Mar 1, 2019 03:09 pm
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