Naresh Goyal, Jet Airways and his crony capitalism: Way Forward
Jet Airways is the same story as other corporations demanding
again & again for capital which was once favoured/supported by state run
PSUs with State Bank of India or others as lead Bank & the outstanding dues
are to the tune of some fancy numbers over Rs.8400 crores. When there is no
sign of any revival, resolution and only loss-making restructuring is there for
lenders then put it through test of time and test of legality under IBC
(Insolvency & Bankruptcy Code) & NCLT (National Company Law Tribunal). Bailout
and sentiments have no meaning in a market economy because market favours none
when manipulations are none and regulators are only for regulations.
May 10 was the first deadline for submitting binding interest
for Jet Airways, and more deadline would come in next 6 months for potential
bidders- Etihad Airways, TPG Capital and the NIIF for Jet Airways & to
submit their binding financial bids for acquiring the airline. Looking
over the debt pile of more than 8400 crores with operational inefficiency
attributed to crony capitalism(emphasis) & past records it seems a never-ending
wo for Jet Airways.
How Etihad once killed Air India is no secret!!
Jet Airways and its crony capitalism is that example which was
once problem creator for AI. The story was not a hidden truth where it had
tried & blocked growth of Air India & Tata Airlines. It should not be
given any leverage and like or unlike other companies if there are no
prospective investors for Jet, simply put it under NCLT & IBC or, if gov
chooses then merge it with AI thus availing its lost international routes to
Etihad during last decade to crony capitalism. It was Etihad which bought
unutilised inventory of AI Boeing planes under some outside influence when it
started facing problems. It’s unnecessary for Government to go for bailout
which brings plethora of litigations & anti people sentiments, when market
economy has taken place in 21st century aspirational India.
(How to make kill a
prestigious airline can only be pre-planned and needs a cold-blooded strategy) First, number of AI
Boeings bought during first decade of 21st century was in more numbers than
what needed, then altered its seats dimensions to accommodate less passengers
for International flight for giving comfort thus directly impacting revenues on
a long route revenue business model. When it seemed too less, international routes
were given to Etihad on preferential basis & lastly to put last nail in
coffin, unutilised inventory was sold to Etihad itself thus favouring more, all
under compulsion. (#CAG report and notes
mentioned in autobiography of Mr. Vinod Rai, former CAG)
Otherwise, it’s also another classic case of how
government policies changes or who made those changes happen; like former Civil
Aviation Minister Praful Patel used to do with AirIndia saga. We can also make
it an example when founder behaves
like ‘Darbari culture’ & like Mallya sitting in London, Mr. Goyal bidding
for his airline to gain control again while he has done nothing in last 1 year
for revival of his corporations.
There is always blood & toil of employees and
in early days for promoters but that’s not an excuse for all irregularities. First,
any corporations took unbridled loans which is only public money from banks
without having a check on expenses in name of expansion & lastly wants gov
for bailout in name of job losses. Why would banks fund any extra if your
financials are not in line and they are good till asked to bring equity
infusion by promoters or dilute their stake for some outside investors. Additionally,
common behaviour of every promoters in early days was to take away the portion
of their equity infusion and other investments made by him.
We may say it’s the economic
compulsions of capitalism, psychological games played with lenders or the greed
of promoters/investors, but underlying philosophies of job losses answers are
still elusive. Most of corporations are started with initial funding ratio of
1:4 divided b/w promoters & lenders. Promoters are good till not to ask for
their equity dilution or bring some equity infusion and their first motto for
first 2 years of operations is to get back his money through
diversion/siphoning of funds, personal expenses like lavish travelling, stay
& others or similar other excuses.
Meantime, Abu Dhabi
based Etihad Airways has concluded the due-diligence process & wants to
remain minority stakeholder before it places its final financial bid for
acquiring Jet Airways. It’s the only one shown interest on 10th May
meeting while the hope is still there for other bidders to join. The other two
potential bidders- TPG Capital and the National Investment and Infrastructure
Fund (NIIF) have started their respective processes and maybe bid jointly with
Etihad in future sensing more doubt and connivance of Jet Promoter Naresh Goyal
in the whole saga.
(Views expressed are personal and in continuation to Jet Airways saga like the one happened with Kingfisher Airlines)
