Has Etihad tightened its grip over Jet Airways?

Acting CEO Ravishankar Gopalakrishnan is the fifth senior executive to quit Jet Airways since Etihad deal

Jet Airways is facing rough weather with its stock plummeting and senior executives bailing out. In the last one year, Jet Airways stock has fallen from a high of Rs 688.60 when the deal between Eithad and Jet Airways was announced to a low of Rs 210.25 in early February. It is presently trading around Rs 230, much closer to its year’s low. 

 

More than the share price, the exit of five senior executives since the stake sale to United Arab Emirates based Eithad Airways has raised concerns among investors. A report in business daily Mint quotes an unnamed source as saying that the exit was on account of difference between the operating strategies of the two airlines. There was lot of disconnect in the strategies of Etihad Airways and Jet Airways in terms of adding more flights via Abu Dhabi, planning route networks, etc. 

 

There is a strong underlying message behind the resignation of Acting CEO Ravishankar Gopalakrishnan. It is clear that despite Jet Airways clarification to SEBI, Etihad airways holds complete control over the Indian airline. Naresh Goyal is no longer able to prevent his key senior executives from quitting the airline at this crucial juncture.

 

This becomes clear from a news report in the Economic Times. The report says that Jet Airways is scheduling its flights in order to feed Etihad’s traffic. Since the announcement of the deal, Jet has cut 384 flights so that maximum traffic can be fed to Etihad. The priority, as has been mentioned in an article earlier (Read here) is only to use Jet Airways as a source to feed Etihad. 
 

Etihad Airways might have avoided the open offer by adhering to the rules defining control of a company. But in spirit, it seems to be violating the rules of controlling a Indian company. It is the employees and shareholders who are paying the price of Naresh Goyal’s silence. To his credit,  by selling his stake and convincing a government, who needed little convincing on seat expansion at the cost of the entire Indian aviation sector, Goyal has at least kept Jet Airways alive and kicking in the debt ridden sector.