MUMBAI -- Jet Airways founder and Chairman Naresh Goyal on Monday stepped down as chairman of the board, making way for lenders led by State Bank of India to take control of the troubled airline and provide a 15 billion rupee ($217.7 million) capital injection.
The Indian carrier will issue 114 million shares, or 51%, to lenders after the debt infusion, the company informed the stock exchanges. Goyal's wife Anita Goyal and Etihad Airway's Director Nominee Kevin Knight will also quit the board.
"The 15 billion rupees is a fully secured, priority, interim funding for two months which we believe is good enough to normalize operations of the airline before it is sold," State Bank of India Chairman Rajnish Kumar told CNBC-TV18. "In return, lenders are getting a 51% stake, which itself is worth over 15 billion rupees," he said. Under the new plan, Eithad's stake will be halved to 12% and Goyal will hold only 25%, down from the current 51%, Kumar said.
The banks will run the bidding process for the airline from April 9 to April 30, the SBI chairman said. "There is no legal bar on anyone with a funding and revival plan in place. The option is open for anyone including Naresh Goyal and Etihad to bid for the stake."
Shares of the airline jumped 15.46% to 261.00 rupees on the Bombay Stock Exchange on Monday.
It is still unclear if Etihad would shed its entire stake in the airline. Earlier reports suggested that Etihad Airways would seek to exit if its conditions were not met.
Jet Airways has canceled about a fourth of its fleet and is facing severe pressure from employees, agitated passengers, as well as lessors. Pilots have threatened to stop flying from April 1 if their salaries are not paid by the end of March.
The situation had moved the government to hold an emergency meeting with Jet Airways executives to work a way out of the crisis.
Jet Airways has been struggling under a mountain of debt and rising losses as fierce competition in India's aviation industry continues to push fare prices lower and squeeze margins. But Etihad Airways is concerned about some issues, particularly in relation to the Goyal family's future role in Jet Airways.
High fuel prices, a weakening rupee and intense competition that pushed down Jet Airways fares. Employees and aircraft leasing companies have not been paid for several months. The airline on Feb. 14 reported its fourth consecutive quarterly loss -- 5.88 billion rupees in the October to December period.
In August, the carrier embarked on a plan to cut costs by 20 billion rupees over the next two years. Fresh equity infusion was part of the plan.