Jet Airways needs to cut costs, Naresh Goyal warns employees
Jet, which operates 113 aircraft to 76 destinations, has been the first existing airline to benefit from the government’s decision in September 2012 to allow foreign airlines to invest as much as 49% in local airlines. Pradeep Gaur/Mint
New Delhi: Jet Airways (India) Ltd chairman Naresh Goyal has warned employees that the airline needs to cut costs as it combines its network with that of Abu-Dhabi-based Etihad Airways PJSC, which has bought a 24% stake in Jet.
The warning comes after Jet announced a record loss of nearly Rs.1,000 crore in the September quarter and analysts said that a major part of the infusion from Etihad may have been wiped out.
The deal was worth $900 million (around Rs.5,616
crore today)—$379 million in equity in the airline, $150 million in
equity in Jet Airways’ frequent flyer programme, $70 million from the
sale and leaseback of three pairs of Heathrow airport slots and $300 in
million debt financing.
“The months ahead will be critical and we would need to
work as a team to deliver strong commercial, operational and financial
benefits for all our stakeholders, by creating operational synergies,
rationalizing costs and expanding the footprint of our international
network,” Naresh Goyal wrote to employees on 20 November, announcing the
formal closure of Etihad’s stake purchase. Mint has reviewed a copy of the message.
Jet, which will soon have to compete in India with Singapore Airlines and AirAsia’s local units, declined to comment on Goyal’s letter.
Jet, which operates 113 aircraft to 76 destinations, has
been the first existing airline to benefit from the government’s
decision in September 2012 to allow foreign airlines to invest as much
as 49% in local airlines.
Goyal said Etihad representatives James Hogan and James Rigney
have joined Jet Airways’ Board and their “vast expertise and immense
experience, will further enhance the performance of Jet Airways and
equip it to surmount any challenge that may come its way”.
Some of Jet’s existing senior employees are, however, quitting.
“My six-year journey with Jet will end in two days,” the airline’s chief commercial officer Sudheer Raghavan
said in an email to employees on 27 November. “It takes a resilient
team like all in Jet to just keep going despite the massive challenges
we faced in the past few years. We ran the dark gauntlet, but I see
light ahead.”
“God bless Jet Airways and guide it on its journey to
regain its old glory. It has the DNA to survive and succeed,” Raghavan
said.
Raghavan said he plans “to take a few months off to do a
few things I have been putting off and then I’ll hit the job market
again”. Mint has reviewed a copy of the message.
Raghavan was instrumental in building Jet’s route network
in recent years and was also the spokesperson for the airline on many
public forums.
Jet’s CEO and chief financial officer had quit earlier this year after Etihad moved in.
In his email, Goyal said together with Etihad Airways,
Jet will enhance connectivity “through the gateway cities of Mumbai and
New Delhi, and, progressively, through other regional gateways across
India”.
The airline is likely to align and feed Etihad’s hub at Abu Dhabi, analysts have said.
An analyst said Goyal’s mail was required to prepare
employees for changes. “First, now that all approvals have been
received, a formal announcement to the employees was needed. Perhaps in
not so pompous language, but needed nevertheless,” said Jet’s former CEO
Steve Forte,
adding, “Secondly, reading between the lines, the message is preparing
the employees to upcoming changes both in management, organization and
work ethics/standards, etc.”
He said Jet will most likely be an Etihad-controlled
airline now. “If Etihad has it its way, there will be several changes in
management and they will run the airline. I see it as a positive
trend,” he said.
Jet’s stock fell 0.09% to Rs.294.05 on BSE, while the exchange’s benchmark Sensex gained 0.56% to close at 20,534.91 points.
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