This is what Jet Airways' survival may depend on

Jet Airways Ltd`s 69-year-old founder Naresh Goyal, who started out as an assistant in a travel agency, wove together charm, persistence and consummate dealmaking to build India's biggest full-service carrier.

Now, his penchant for control has emerged as a major obstacle as the indebted airline tries to negotiate a rescue deal, several people who have worked closely with him or known him over the years told Reuters on condition of anonymity.

"He was a visionary in his day but those days are behind us," said a senior aircraft financier who has done deals with Goyal. "This is the moment of truth for Naresh Goyal."

The rising dominance of low-cost carrier IndiGo in a price sensitive market as well as high oil prices, hefty fuel taxes and a weak rupee have left Jet strapped for cash and unable to pay employees and lessors on time.

The 25-year-old airline, which Goyal set up with his wife at a time when state-run Air India was the only real formidable opponent, has outstanding dues of about $400 million.

Jet, which has a mainly Boeing Co fleet, has delayed pre-delivery payments to the Seattle-based aircraft maker as well as to Airbus SE, and is overdue on its repair and maintenance contracts, two sources aware of the matter said.

Although the Indian air travel market is the world`s fastest growing, at about 20 percent a year, it is also hobbled by cut-throat competition and chronically low fares. To stay afloat, Jet is cutting flights on some non-profitable routes and trying to raise cash by monetising assets.

It still retains a valuable strategic position as the biggest operator at Mumbai airport, where all of the good slots have been taken and a second airport is years away. It also has lucrative slots at major international airports and code share agreements with more than 20 airlines. 

Jet has survived a near-death experience once before, in 2013, Abu Dhabi`s Etihad Airways injected $600 million of capital for a 24 percent stake in the airline, three London Heathrow slots and a majority share in Jet`s frequent flyer programme. The infusion helped Jet pare down debt and fight growing domestic competition.

The airline is in talks with Etihad a second time and with Indian conglomerate Tata Sons for fresh funds or a stake sale, but sources have told Reuters that any rescue would require Goyal to step down, or take a less prominent role.

Goyal has rejected seeking funds from Tata if it meant him having to give up his position, two sources aware of the discussions said. Talks with Etihad are continuing.

Goyal did not directly respond to requests for comment but a Jet spokeswoman said the "conjectures being implied with regards to the organisation`s ways of working" were misleading.

"The airline management is a fully empowered team ... all strategic, operational and tactical decisions are taken by the management under the advice of the company`s board of directors," she said.

UNFORGIVING BUSINESS

Will Horton, an independent aviation analyst based in Hong Kong, said it was time for Jet to evolve beyond "one leader or family".

"A change at the top runs its course down. Freedom to implement a new management plan is critical for strategic and financial partners, existing and potentially new," he said.

When Goyal launched Jet Airways in 1993, air travel in India was at a nascent stage. He kickstarted the sector`s growth and put the country on the map.

With 124 planes, Jet now flies to places like Hong Kong, Dubai, Paris and London, besides over 45 destinations in India.

Ceding control may not be easy for Goyal. He is Jet`s chairman and holds a 51 percent stake in the airline with his wife Anita still on the board.

"It is a very mom-and-pop kind of operation where nothing happens without the two of them," said a former Jet employee, who describes the founder as a workaholic.

Goyal is always involved in key decisions and the airline`s CEOs often have little executive power and do not survive for long, according to two other current and former employees.

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Jet has had seven CEOs in 10 years with its current chief Vinay Dube taking over in August 2017.

"The airline is his life and he built it from nothing, you have to give him respect for that," said one of the former employees. "But ... the airline business can be unforgiving."

In 2012, Kingfisher Airlines, founded by Indian businessman Vijay Mallya, went bust for want of cash, leaving its lessors and creditors with pending dues.

After Kingfisher went down, India ratified the Cape Town convention, an international treaty making it easier for foreign owners to repossess aircraft when airlines default on payments. That means Jet`s lessors could choose to reclaim planes in case of a default. 

The airline could also be dragged to court by its creditors under India`s new insolvency laws.

LIMITED OPTIONS

Jet is committed to turning around its business and creating "a competitive cost structure that ensures a sustainable future for the airline and its stakeholders", the spokeswoman said. 

She did not comment on any specific deals but said the airline continues to be in active discussions with various investors to secure "sustainable financing".

But Jet`s rescue options appear somewhat limited given its poor financial position - it posted losses in the last three quarters and its shares have fallen about 70 percent so far this year, erasing more than $900 million in market value.

Goyal, is knocking on all doors, including that of the government. Jet and Etihad executives also met lenders in India to discuss a rescue deal.

Senior Etihad adviser and former Jet CEO Cramer Ball was in Mumbai last week, just days ahead of a meeting of the Abu Dhabi carrier`s board on Dec. 7 where it was expected to discuss its investment in the Indian airline, two sources said. The outcome of the closed-door meeting remains unknown.

Etihad, in an e-mail to Reuters, said it would not comment on speculation.

However, the Abu Dhabi carrier, which owns 24 percent of Jet, is ready to put in more money only if Goyal dilutes his stake, a source aware of the matter told Reuters. 

Even so, Etihad`s stake will be capped at 49 percent due to foreign ownership rules in Indian airlines and if it goes past the 25 percent ownership threshold, it would need to adhere to capital markets regulations and make an open offer to shareholders to buy a further 26 percent stake. 

If forced to do this, Etihad would risk breaching the foreign ownership restrictions and so it may have to seek a rare exemption from the markets regulator from making an open offer.

Talks with Tata are on the backburner for now but three people familiar with the conglomerate`s thinking said they may be found waiting in the wings if the Etihad deal falls through.

"There is an expectation that there will be a rescue and Goyal will find a way - he always does - but there is no clarity on how much control he will have after a deal is done," said one of the people who works with him.