The rise and fall of Naresh Goyal, the high-flying promoter of Jet Airways

Jet Airways promoter Naresh Goyal's ambitious strategies and poor execution could cost him control of the airline he founded 25 years ago

He began as a cashier in his uncle's travel agency and went on to become the chairman of India's second largest airline by market share, but Naresh Goyal's long and eventful rein at the helm of Jet Airways is set to end soon.

A hands-on promoter and a master in forging partnerships, Goyal, 69, built commercial ties with airlines around the world including Etihad Airways, which acquired a 24 per cent stake in his airline in 2013. As he seeks a bailout from Etihad for the second time, he may have to give up the control of the airline he founded 25 years ago.

Jet Airways was not the first private domestic airline to start operations when government eased rules in early 1990s. But it is the only surviving airline of the era.  East West Airlines started in 1992 and closed four years later. Others, including Damania Airways, NEPC, ModiLuft, folded up too.

“Creating a world-class homegrown airline is Goyal's legacy,” recalls a former employee of Jet Airways. With its attention to detail and customer focus, the airline captured the imagination of Indian air travellers long used to drab service of Indian Airlines. Goyal was also able to attract best talent in aviation from India and elsewhere and that is one of the reasons why Jet managed to survive when its peers floundered.

In its first year of operations, Jet operated 28 daily flights to 12 destinations with a fleet of four Boeing 737 aircraft. A decade later, the airline commanded a domestic market share of nearly 46 per cent (today its share is 15.8 per cent). The advent of no-frills brands – first in Air Deccan and later GoAir, IndiGo, SpiceJet and full-service Kingfisher dented its share. 

Two significant decisions – the acquisition of Air Sahara and an aggressive international foray in 2006-07 -- continue to impact the airline to date. Goyal, it is said, was advised by his close colleagues against the Air Sahara acquisition. It was not worth the price the airline was paying, they told him. But Goyal persisted and eventually Jet acquired Air Sahara. The airline management tried restructuring and rebranded the airline Jet Lite, but the acquisition has been a drain on its resources. Three years ago, Jet wrote off its entire Rs 1,800 crore investment in Jet Lite. 

Over the past two decades, Goyal and his wife Anita have been hands-on promoters. At the same time, he has been successful in managing the policy environment. Whether it was on grounds of protectionism in the 1990s and 2000s (which scuttled Tata Singapore Airlines’ aviation plans) or for the need of foreign investment in airlines in 2012, Goyal swayed the policy to suit his airline. Jet Airways was the first beneficiary of the relaxation in foreign direct investment rules when Etihad picked up 24 per cent stake in the airline in 2013.

Over the years, the airline has also seen frequent changes in its top deck and reshuffling of portfolios all of which have impacted the airline. Faced with a crisis, Goyal's strategy has been to throw more resources to solve it – such as hiring more executives or consultants, often leading to an overlap in roles, recalls a former colleague. For instance, last year it got an executive from Etihad in the finance role despite having senior team members in the department. The airline retains a top-heavy structure though in recent months, it has asked seniors to take a pay cut.

“Goyal changed the status quo in Indian aviation, raised the bar on products and services and forged alliances with many international carriers like Air France-KLM, Delta and others. No other Indian carrier has achieved that,” said a sector expert. “He is an unusual businessman. Impatience coupled with brilliance. Wit on one side and ego on another. Goyal can be faulted for execution but not for foresight or strategy,” the colleague recalled.

But bad decisions and an adverse macro-economic environment, principally the sharp rise in oil prices, magnified those failings. "Jet Airways has been in perpetual restructuring mode for the past five years. But despite the notable improvements in productivity and reduction in non-fuel costs, this has not delivered a financial turnaround. The investment from Etihad in 2013 had provided some breathing space, but the airline once again finds itself confronted with a challenging situation. To secure Jet’s long term-viability, timely recapitalisation and restructuring should be accompanied by fresh thinking, which could include a change of ownership,” aviation consultancy CAPA said in its report last September.

This is not the first time that the airline is facing a serious crisis.  Jet faced its first predicament in April 1997 when government disallowed foreign airlines to hold investment in Indian carriers. Gulf Air and Kuwait Airways controlled a 40 per cent stake in Jet Airways at that time and many believed Jet would close down too. It did not. Goyal acquired the stake from the two Gulf airlines. Goyal currently owns 51 per cent in the airline but with banks considering converting existing debt into equity, the promoter stake would be diluted.

Late last year, with the airline headed for default and employee salaries in abeyance after consecutive quarters of losses, talks were held with Tata Sons, too, for a stake sale but the discussions evaporated because Goyal was unwilling to accept the stiff conditions laid down by the group.

In 2013, Etihad Airways invested $ 379 million for a 24 per cent stake and bailed out the airline. While relations between Etihad and Goyal turned cold in last few years over Jet's growing closeness with Air France-KLM group, the Abu Dhabi airline is in talks once again with Goyal and the airline's lenders to prepare a resolution plan. This may save the airline. Whether it will save Goyal’s presence on its board is the question that is still to be determined.