A former Jet Airways insider says Naresh Goyal cannot run the airline

• Jet Airways former CEO Steve Forte advises banks against Naresh Goyal's offer.
  
• Goyal's offer to invest additional₹ 700 crore to retain at least 25% stake.
  
• Etihad offered a price 46% below Friday's (January 18) closing price and sought to oust Goyal.

India’s oldest private airline, Jet Airways, is on the brink of a collapse, and there is a bitter battle for control underway between the two partners that own the company that has already defaulted on its debt.

Steve Forte, the man who led Jet Airways for a couple of years until 2002, has a point to make about what is unfolding at the airline. “If Mr. Goyal's offer is accepted by the banks then nothing will change and the downward spiraling of Jet Airways will continue. The airline will burn through the new cash infusion just like it did with the initial infusion from Etihad and any other loans it received,” he told the Economic Times (ET).

Naresh Goyal has offered to invest up to ₹700 crore in the cash-strapped airline and sought to retain at least a 25% stake in the company. “Given Jet's outstanding debt (over ₹8,000 crore),₹700 crore from Mr. Goyal is a drop in the bucket,” according to Forte.

In 2013, Etihad invested more than ₹2,000 crore for a 24% stake in Jet at a considerable premium to its market value, arranged soft loans for the Indian airline, and paid its bills, ET reported. Naresh Goyal, the founding Chairman, remained at the helm and five years hence, the airline

Not surprisingly, Etihad is bargaining hard this time. Reports suggest the Abu Dhabi-based partner has only offered to increase its stake in the cash-strapped airline by buying shares at only ₹150 a share- a 46% discount to Jet’s current share price - and demanded the complete exit of owner Naresh Goyal and his family as well as the right to appoint a CEO.

Meanwhile, Indian banks find themselves between a rock and a hard place. Aside from its concerns about Goyal’s leadership, Etihad will find it difficult to increase its bid for Jet, despite the potential of the Indian market, because of its own financial stress as well as the restrictions on foreign ownership of airlines in India.

The anxiety will as much for the investors holding the shares of Jet Airways as the boardroom battle plays out. The stock has nearly 65% of its value in the last one year.

See also:
Jet Airways’ revival delayed by Etihad’s hard bargain

Lenders’ plan to keep Jet Airways' afloat may put Etihad in the cockpit