Naresh Goyal, who was arrested by the Enforcement Directorate late on Friday in a money laundering case linked with an alleged fraud of Rs 538 crore with Canara Bank, was once the poster boy of Indian aviation.
Goyal, now 74, founded and built Jet Airways into a world class airline, and then oversaw its fall from the skies. And it wasn’t just this airline that he shaped. For better or for worse, Goyal’s fingerprints were all over the direction India’s aviation sector took for more than two decades, thanks in part to his clout among politicians cutting across party lines and governments.
Born in 1949, Goyal spent his formative years in Punjab — first in Sangrur, and then Patiala. After a crippling financial crisis hit the Goyal household, the family moved to Patiala from Sangrur in the early 1960s. Seth Charan Das, a relative who was a big businessman in Patiala, assisted the family in those difficult times.
Das was also behind Goyal’s foray into the travel industry. In 1967, Goyal started working for Das’s travel agency in Delhiwhich had become the general sales agent for Lebanese International Airlines.
Over the next six to seven years, Goyal gained valuable experience and developed a deep understanding of the travel and aviation business through his association with various foreign carriers like Iraqi Airways and Royal Jordanian Airlines. These years also saw him travelling extensively, learning the nuts and bolts of the airline business.
In 1974, Goyal decided to set up his own business, and started Jetair (Private) Limited, providing sales and marketing representation to foreign airlines in India. The company represented some global majors in India, including Air France and Cathay Pacific.
The take-off: Naresh Goyal and Jet Airways
The initiation of liberalisation of the Indian economy in the early 1990s came as a watershed moment for Goyal. As the government allowed private airlines to operate scheduled services under its Open Skies Policy, Jet Airways came into existence, and launched commercial operations in May of 1993. It was then backed by Gulf Air and Kuwait Airways, which together held 40 per cent stake in the airline.
At the time, a few other domestic airlines — East-West Airlines, Damania Airways, Sahara India Airlines, and ModiLuft — were established. Except for Sahara, which was later rebranded as Air Sahara, the other three airlines disappeared from the Indian aviation map within a few years.
As Jet Airways emerged as the major challenger to government-owned carriers Indian Airlines and Air India, Goyal purportedly made efforts — using his clout and network in the government and among politicians — to ensure that his airline charted a course of rapid growth.
A number of aviation industry insiders believe that Goyal was behind the scuttling of a proposed joint-venture airline between the Tata group and Singapore Airlines in the mid-1990s. In the early 2000s, when the government was looking to partly divest its shareholding in Air India, the Tata group and Singapore Airlines were close to jointly taking a 40 per cent stake in the national carrier. But an uproar from various political quarters and trade unions marred the process, resulting in a frustrated Tata group withdrawing the proposal. The grapevine had it that Goyal had worked behind the scenes to block the entry of Tata-Singapore Airlines into Indian skies.
Jet Airways had already become the airline of choice for Indians, offering world-class service that put it way ahead of Indian Airlines and Air India in the eyes of flyers. The next few years saw Jet Airways going international and rapidly expanding its domestic market share. It had a successful IPO in 2005, and was the market leader on most counts.
While Jet Airways was on the ascendant and government-owned airlines were losing ground, new entrants were emerging in India’s aviation space. Low-cost carriers like Air Deccan, SpiceJet, IndiGo, and GoAir (later rebranded as Go First), and Vijay Mallya’s Kingfisher Airlines were beginning to change the contours of Indian aviation.
The phase of turbulence: Troubles begin to accumulate
It was perhaps these developments that forced Goyal’s hand in acquiring Air Sahara in 2007 for over Rs 2,200 crore, a valuation that many believed was quite high. Costs were also piling up for Jet Airways on the international operations front. The airline had ordered nearly two dozen wide body aircraft from Boeing and Airbus, and was applying for international routes at a rapid pace, but without having in-house expertise and adequate personnel training for operating long-haul flights.
At the same time, fare wars began among Indian airlines as low-cost carriers gained ground. To make matters worse, global oil prices shot up in 2008 and the year later saw the world slipping into a financial crisis, both of which had a significant impact on the aviation and travel sectors in various parts of the world. The surge in oil prices was a major headache as along with oil, jet fuel prices had skyrocketed. Jet fuel usually accounts for over 40 per cent of an airline’s operational costs. The financial crisis had hit the demand for air travel.
Under pressure from low-cost carriers and grappling with a difficult operating and economic environment, full-service carriers Jet Airways and Kingfisher Airlines borrowed heavily. In 2012, Kingfisher had to shut shop. Jet Airways, too, was not in great financial health and was scouting for funds and investors.
Interestingly, the airline got a lifeline of sorts with the government changing its FDI policy to allow foreign airlines to own up to 49 per cent stake in Indian carriers. Many saw Goyal’s hand in this policy shift. In April 2013, Abu Dhabi-based Etihad Airways announced that it was acquiring a 24 per cent stake in Jet Airways for more than Rs 2,000 crore.
The deal coincided with India inking an agreement with Abu Dhabi to increase flights under the bilateral agreement. Various opposition lawmakers were reported to have alleged at the time that the expansion in bilateral flying rights was agreed to by the government to facilitate the Jet Airways-Etihad stake-buy deal. A parliamentary panel even objected to the revised bilateral air services agreement.
Burn and crash: A grinding battle, and defeat
Over the next few years, Jet Airways continued to slug it out with a growing IndiGo. While fare wars took their toll, generally lower fuel prices in the 2015-2017 period kept Jet Airways going.
But things took a turn for the worse by 2018, as global oil and fuel prices started rebounding, and the domestic aviation space had a new leader in IndiGo, which through its vast network, single-aircraft model fleet, and low-cost financial and operational model, could dictate fares. By then, allegations that Goyal was diverting funds from the airline had also surfaced.
After accumulating losses for over a year and under a heavy debt burden, in April 2019, Jet Airways was grounded after the consortium of banks led by State Bank of India rejected the carrier’s request for emergency fund infusion. The consortium refused to provide Jet Airways with the Rs 400 crore in emergency funds that the airline was seeking to stay operational.
In the previous month, the lenders had forced Goyal, his wife Anita, and two other members of the Jet Airways board to step down. Though Goyal tried to get Etihad to infuse more funds in Jet Airways by acquiring additional stake, the talks were not successful. The Tata group was also reportedly in the fray to acquire Jet Airways, but even that did not materialise.
Jet Airways flew to more than 65 destinations in India and across the world, including Europe, the Middle East, Southeast Asia, and North America, with hubs in Mumbai, DelhiBengaluru, and gateways in Amsterdam, Paris, London, and Abu Dhabi. It operated 124 narrow body and wide body aircraft on nearly 1,000 domestic and international routes, before suspending operations.
Later that year, Goyal was barred from leaving India as government agencies investigated allegations of financial fraud against him. Since then, Goyal and others at Jet Airways have come under the scanner of multiple agencies, including the Serious Fraud Investigation Office (SFIO), the Income-Tax department, the Central Bureau of Investigation (CBI), and the Enforcement Directorate (ED).
In May 2019, the ED began probing Etihad Airways’s investment in Jet Airways’s frequent flyer programme — Jet Privilege Pvt Ltd (JPPL) — to ascertain if FDI norms were violated in Etihad’s acquisition of 50.1 per cent stake in JPPL for $150 million. The agency has also questioned a few former top officials of Jet Airways in connection with a FEMA case.
A Ministry of Corporate Affairs (MCA) inspection had reportedly found large-scale irregularities, including diversion of funds, at the airline. The Income-Tax department also searched the carrier’s offices and found discrepancies in their books.
Present and future: Where Jet Airways stands now
Currently, Jet Airways is undergoing the corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code. In January 2023, the National Company Law Tribunal (NCLT) allowed the Jalan-Kalrock Consortium (JKC), the winning bidder, to take over Jet Airways. But JKC still has not been able to get the airline’s ownership transferred due to differences with the carrier’s Committee of Creditors (CoC) led by the SBI. The issue now appears to be headed for settlement with the consortium coughing up payments to the lenders.
The lenders had alleged that the JKC was not infusing money into the airline and was not meeting its obligations, while JKC accused the CoC of creating hurdles to the transfer of the carrier’s ownership and undermining efforts to recommence its operations. In a hearing before the Supreme Court in July, the lenders even called for the grounded airline to be liquidated. Cases pertaining to Jet Airways, its bankruptcy, and the CIRP are being heard by the Supreme Court and NCLAT.
On Thursday, however, the JKC consortium seemed to be moving towards resolving the issues and moving closer to take control of the grounded airline, as it deposited Rs 100 crore to lenders as part of the payment to implement the revival plan. According to JKC, which has so far invested Rs 250 crore into Jet Airways, it is required to pay another Rs 100 crore by September 30 to take control of the airline.