Jet Airways to discuss turnaround plan

In what could bring some relief to the investors of Jet Airways, the management of the troubled carrier will discuss a turnaround plan in its upcoming board meeting on August 27 in Mumbai.

“We wish to inform you that the Audit Committee and the Board of Directors at their meeting on Monday (August 27, 2018), while considering the unaudited financial results for the quarter ended June 30, 2018, among other things, will take up the matters in relation to cost-reduction initiatives and turnaround plan, for which the management had earlier sought time,” the airline said in its stock exchange filing.

The airline had to defer its first quarterly results because the auditors did not “recommend” the financial results in the annual general meeting (AGM) held earlier this month.

The deferment raised a few eyebrows among the investors community. Arvind Gupta, a shareholder of the company and the whistleblower in the infamous Videocon-ICICI case that led to the ouster of Chanda Kochhar from ICICI Bank, in his letter to the Prime Ministers’ Office, has alleged that the company’s foreign partner, Etihad Airways, has been taken for a ride and Jet has been involved in "continued fudging of audited accounts and manipulating the financial affairs”.

“Apparently, the real conflict is between the old foreign partner, Etihad Airways, and Naresh Goyal has cropped up due to continued fudging of audited accounts and manipulating the financial affairs by the Board of Directors, led by Naresh Goyal. Independent Directors and the Audit Committee have been ineffective,” he said in the letter dated August 13.

Referring to the appointment of former civil aviation secretaries, Ashok Chawla and Dr. Nasim Zaidi, to the board as dubious, Gupta noted that the company has used power to fudge its numbers and urged the government to investigate their appointment. Zaidi is the former head of aviation regulator, Directorate General of Civil Aviation; Chawla, who is now the chairman of the National Stock Exchange, has served as the chairperson of the Competition Commission of India as well as the finance secretary.

“The open sky policy has been abused to siphon away the profits of Indian operations to tax havens via Dubai. The balance sheet and the audited accounts are doctored to deceive the regulators... Jet Airways with negative net worth should have been grounded long back. Evidently, Jet Airways has genuine Godfathers in the Ministry of Civil Aviation,” he alleged.

An email sent to the airline remained unanswered at the time the story was published. However, the company, in its filing, had said that it had not received any communication from the Ministry of Corporate Affairs regarding these allegations.

It should be noted that Naresh Goyal, group chairman, at the AGM had said that he was “guilty” and “embarrassed” because shareholders are losing money.

“Key external factors that slowed down our momentum were --- weakening of the Indian rupee, with a consequent rise in fuel costs, industry’s inability to pass on increased costs to the consumer and no corresponding increase in ticket fares,” Goyal said at the meeting held in Mumbai.

Interestingly, the carrier, as a cost rationalisation measure, had asked its employees to take a pay cut of up to 25% from August. Employees with annual salaries of up to Rs 12 lakh were asked to take a 5% cut, while senior officials with an annual salary of Rs 1 crore and above were asked to absorb a cut of 25%.

However, the airline had to roll back its decision on salary cut ahead of its quarterly results. Reports also suggested that the management of the airline had allegedly told its employees that it cannot fly for more than 60 days --- news that was categorically denied by the airline.

However, the company is in dire need for fresh capital. The massive debt, coupled with external factor, such as rising fuel cost and weak rupee, has led to the airline bleeding profusely. As of March 31, 2018, the airline’s debt stood at Rs 8,424 crore, of which Rs 2,054 crore was aircraft-related.