Goyal wants to keep out the low-cost arm out of a possible deal with the Tata Group
The ongoing talks between Tata Sons and Jet Airways could get stuck over Naresh Goyal's plan to keep JetLite out of the deal, and the Tata Group's insistence on a non-compete clause from the aviation veteran.
JetLite is the low-cost arm of Jet Airways and is the erstwhile Air Sahara, which was acquired by Goyal in 2007.
"Goyal is an industry veteran and wants to be active. He will loath to step away completely," said an executive. One of the options being explored, the executive added, is to keep JetLite out of the deal so that Goyal can continue in the aviation industry.
A Jet Airways spokesperson said: "In line with its policy, Jet Airways does not comment on speculation."
But Goyal's continuation in the sector will go against one of the primary conditions of Tata Sons.
While the Tata's may not mind keeping the loss-making unit out of the deal, they may not agree with Goyal's plans.
The N Chandrasekaran-led Group wants a non-compete commitment from Goyal. The clause could prevent the Jet Airways founder from running an airline, and will also force him out of the aviation business. That will be a big call for Goyal, who started off as a travel agent before setting up Jet Airways in 1992.
A year before Goyal gave wings to his dreams, in 1991, Air Sahara was founded. After the acquisition by Jet Airways, the airline was rechristened JetLite.
Goyal had planned to merge the arm with JetKonnect, but the proposal was turned down by the Indian Government.
"JetLite now operates under the Jet Airways brand and will continue to operate under its own 'S2' code. The carrier currently operates an extensive network of Indian domestic services with a fleet of Boeing 737NG aircraft," says a profile by aviation consultancy firm CAPA.
The low-cost arm may not have scaled according to Goyal's wishes. As on March 2018, it had a fleet of 8 aircraft. Financially too, it hasn't taken wings.
According to Jet Airways' 2018 annual report, its low-cost arm widened its net loss to Rs 321 crore in the 2018 financial year, as compared to Rs 57 crore a year earlier.
In the second quarter results ending September 2018, Jet Airways said in a statement that JetLite had a negative worth.
JetLite's market share has eroded from 2.3 percent in January to 1.6 percent in October this year. In October 2017, the market share was 2 percent.
Interestingly, a dispute between Jet Airways and the Sahara group over the 2007 deal continues to drag in the courts. The two sides have made contradicting claims on the original purchase amount, and interest to be paid.Sources added that Tata Sons wouldn't want to get involved in litigations, and will require Jet Airways to sort out the matter. But at the same time, the Tatas wouldn't want Goyal to continue in JetLite.