Naresh Goyal back in the pilot's seat: 2013 to 2017

Things at Jet come a full circle as promoter slowly wrests control from Etihad

During one of the worst times for Indian aviation — in 2013 — to rescue his airline from the brink of closure, aviation legend Naresh Goyal, a man who started from nothing whatsoever, sold a 24 per cent stake in his airline, Jet Airways, to Abu Dhabi’s Etihad Airways for $349 million. 

Soon after the sale, things began to change at the airline. Gary Kenneth Toomey took charge from Nikos Kardassis in mid-2013 as the new chief executive officer (CEO). About six to seven senior- and mid-level executives were brought in by Etihad and put in charge of key functions, replacing a large number of old Jet hands that left. Goyal distanced himself, sticking mostly to board-level interactions. 

Etihad set about the job of trying to make the airline more profitable and trying to move most of the Indian outbound traffic through Abu Dhabi. It injected cash; aircraft utilisation went up from 11.2 hours to 13.6 hours per day. Contracts were renegotiated, better deals were struck and pilot productivity was enhanced. Almost 20 task forces were set up across functions. Many old routes were discontinued and a lot of domestic sectors were weeded out or frequencies were reduced. The whole operation was being geared towards moving traffic from small Indian towns to Abu Dhabi for onward carriage.

Toomey, however, didn’t last long — all of seven months. In May 2014, Jet announced Cramer Ball will be the CEO. Ball was the man credited with turning around Air Seychelles, one of Etihad’s many investments.

Throughout 2014 and 2015, Etihad was firmly in charge of affairs at the airline, with Etihad CEO James Hogan and Chief Financial Officer (CFO) James Rigney overseeing at a macro level. Every important function was being led by someone chosen or placed by Etihad. About 10-12 senior and middle management executives were placed in finance, cargo, operations and flight planning and maintenance. Most hires were being done at the behest of Etihad and the show was entirely being run by them. “At the time, Etihad was firmly in charge and was working aggressively on turning around the airline,” a senior official from Jet, who joined the airline in 2014-2015, says.

Turning things around, at least temporarily, proved easier than expected — thanks to the dip in global oil prices than anything else. This single factor changed the dynamics for the aviation industry in India. But some changes brought in by the new team had also begun to pay off. Traffic was growing, costs were down, oil prices had tumbled and like almost all airlines, Jet began to show signs of life. In 2015-16, Jet made a profit of Rs 1,200 crore — the first time the airline made a profit in eight years. Debt amounting to $600 million was paid through profits generated.

But for reasons not known to anyone, towards the second half of 2015, the relationship between Goyal and Hogan began to change. People within the airline started sensing “souring of the equation” and Goyal started stonewalling some of Hogan’s and Rigney’s proposals and plans. 

Slowly, the faces with the airline began to change. Many of the direct Etihad hires left and most of Etihad executives started to go back. By November 2015, only Ball was left. However, in December that year, Ball resigned ostensibly to head Italian air carrier Alitalia. 

But something didn’t quite ring true. “Many of us wondered; why would you give a small fish more attention than the bigger one?” says a former Jet official, who is no longer with the carrier. What Jet could deliver for Etihad in the long run Alitalia never could.

In Mumbai, matters were placed in the trusted hands of Gaurang Shetty, one of the few old Jet hands to have survived the Etihad storm, as acting CEO. “It was evident that Goyal no longer needed Etihad as much as he did at the time of the investment.” He started tightening the screws so to speak and holding his regular “durbar” meetings. Around October 2015, Amit Agarwal came in as CFO and was later appointed acting CEO.

The cooling of the relationship between the two partners also coincided with a change in strategy for Jet. In March 2016, Brussels was closed as a hub (it was proving unviable) and replaced by Amsterdam. Over the last few months, more and more of Jet’s traffic is being funneled through Amsterdam to the US and other destinations, with a strengthening of the code shares and relationships with airlines such as Delta Air Lines, Air France–KLM and Virgin. Recently, the airline started its third service between Amsterdam and London on the Boeing-777. The Amsterdam hub has worked a lot better for the airline. The airline is expected to fly 64 billion ASKMs (available seat kilometers) in 2017-18, a sharp rise from the 43 billion ASKMs it was doing when Etihad came in. Agarwal argues that the marriage between the two has been among the “happiest possible” with gains for both sides.

Call it fate or luck for Goyal, the improvement in Jet’s fortunes coincided with a dip in Etihad’s. Etihad’s strategy of building a traffic base for itself by investing several billion dollars in acquiring stakes in Air Serbia, Air Seychelles, Air Berlin, Alitalia, Etihad Regional (formerly Darwin Airline), Jet Airways and Virgin Australia appears to be under stress. Many of the investments have not delivered as expected. Globally, many started to term it “a failed spree of investments”. Matters came to a head when, in January, the airline announced that both Hogan and Rigney would step down in the second half of 2017.

Although senior Jet officials maintain that the relationship is unchanged between the two partners, most agree that with bigger problems on its hands, Etihad’s attention on Jet has gone down. Almost no Etihad presence is left in India — although Agarwal argues that this is part of the plan. 

Now, some of the old Jet Airways faces are beginning to resurface in the airline and those who have exited the airline in recent times say that Goyal is back in the driving seat — after a temporary reprieve. Recently, M Shivkumar, former CFO of Jet, joined back after having spent some time at GVK and the Raymond group. Last month, the airline announced Vinay Dube — who was a senior vice-president, Asia Pacific, at Delta Air Lines — as its new CEO, a decision many see as independent of Etihad. Aviation industry sources argue that the only thing left of Etihad today is the 24 per cent stake. It’s over to the inimitable czar of aviation in India, Naresh Goyal, once again.