The Jet set: Private profit, national loss

   By Ravi Shanker Kapoor ,  15-Mar-2019
The Jet set: Private profit, national loss

When Jet Airways does well, chairman Naresh Goyal becomes a billionaire, when it’s in the dumps, taxpayer foots the bill

The taxpayer is fast emerging as the ultimate savior of anybody in crisis, be it the poor farmer or the top tycoon. The latest beneficiary would be Jet Airways chairman Naresh Goyal, who was listed by Forbes in 2005 as the 16th richest Indian with a net worth of $1.9 billion.

Goyal can’t run the airline any longer, so he will soon offload half of his 51 per cent stake in company’s share capital in favor of a consortium of banks, mostly public sector banks or PSBs. How cool! When everything looks good, he becomes a billionaire; when the going gets tough, he moves out—unscathed, still smelling of money. You can bet your last penny that he would remain a billionaire. In India, companies go bankrupt, not their promoters.

Jet defaulted yesterday on part repayment of its external commercial borrowings (ECBs), prodding Goyal to write to the airline’s strategic partner Etihad’s CEO Tony Douglas for an “urgent fund” of Rs 750 crore. “I now look forward to your support and cooperation in saving the airline by an urgent fund infusion of Rs 750 crore by early next week, so that a matching contribution from banks is also disbursed, as per the resolution plan,” Goyal said in the letter.

Usually, Goyal gets “support and cooperation” from anybody he approaches, be it government (of whichever party), banks, or regulators. He also warned of the consequences if the support and cooperation were not forthcoming—“grounding” of the airline. My way or the flyway.

He can afford to be cavalier, for he knows that all his sins will be washed when the government takes over Jet. “In a major move,” the news agency IANS reported on February 14, “the government, through its bankers, undertook a backdoor nationalization of Jet Airways Ltd. With Jet agreeing to give lenders the majority stake by converting part of its debt to equity as the beleaguered airline battles a cash crunch, the lenders, most of whom are government-owned, are now the owners of the airline. And all this has been done at Re 1.”

It is an open secret in Lutyens Delhi that for almost a decade after setting up Jet, Goyal was the lord of everything related to civil aviation in India. It is widely believed that policies were made and unmade at his behest. He even had the gumption and the clout to jeopardize the privatization of Air India in 2001-02. He even fought a war against the then disinvestment minister Arun Shourie, who was chosen by prime minister Atal Bihari Vajpayee to oversee the sale of public sector undertakings.

Shourie openly accused Goyal of building a campaign against the privatization of Air India. It needs to be mentioned here that the Tatas were seriously interested in buying the national carrier. But such was the power and influence of Goyal that he torpedoed the privatization—with deplorable consequences for the public exchequer as well as civil aviation in India. For AI has run into losses running into tens of thousands of crores.

It was in the early years of this century that Goyal got into trouble, primarily because of capricious decision making. It made little sense to put in big money in JetLite, a no-frills, low-cost airline; expert advice was against that, but that’s exactly what he did. While his decision making has been called whimsical, the running of the airline has been termed draconian. Both have played a crucial role in his fall.

Unlike in the classical tragedy where the protagonist’s fatal flaw leads to his fall, in this case the fall will be suffered by the taxpayer.