The Fall and Disgrace of Naresh Goyal

FOR JET AIRWAYS founder Naresh Goyal, the acronym of his ‘Jet Airways India Lim­ited’ upon incorporation in 1992 couldn’t have been more prescient. Arrested by the Directorate of Enforcement(ED) onSeptember1on charges of money laundering, Goyal is al­leged to have diverted funds by appoint­ing family members in the airline and paying salaries of a production house set up by his daughter. Goyal’s links with Panama Papers accused HD Gardi has also been pointed out by ED—Gardi was not just a shareholder in Jet Airways India Limited but a director at Tail Winds India (incorporated in the Isle of Man—a tax haven), which owned 89 per cent of Jet Airways, where Goyal had a 51 per cent stake apart from other common holdings.

In this case, Goyal is accused of siphoning off funds given to Jet as loan on personal expenses such as furniture, apparel, jewellery and payments to residential staff. Goyal is alleged to have laundered loans worth ₹538.62 crore by Canara Bank to Jet Airways. The Central Bu­reau of Investigation (CBI) and ED have been probing Jet Airways for allegedly diverting loan funds it had availed of from a consortium of banks led by the State Bank of India (SBI). In 2019, loans of around ₹6,000 crore given to Jet Airways turned bad. Now, Canara Bank has got its accounts audited by consulting major EY and found diversion of its loan to the tune of ₹538.62 crore.

The EY audit also revealed ₹9.46 crore was paid to Naresh Goyal’s wife Anita, his daughter Namrata and son Nivaan from the accounts of JIL between 2011 and 2019 for various purposes. “The transactions had no rationale and… had been done with the ulterior motive of diverting the amount from the company for personal gains and enrichment,” the ED investigation report stated. From 2010 to 2012, Nivaan and Namrata worked as management trainees with Jet while Anita Goyal was VP, Revenue Management and Network Planning. Between 2012 and 2015, Nivaan and Namrata were executives in service development. In 2015, Anita became a director in the company and was paid fees for attending board meetings, claimed the report. “In the garb of profes­sional and consultancy, dubious expenses to the tune of ₹1,000 crore were booked, personal expenses of Naresh Goyal and his family mem­bers were booked in the company, and unaccounted transactions have been credited to the foreign accounts of the promoters,” the ED report stated after a special court remanded Goyal to ED’s custody for 10 days.

Goyal, now 74, was once the poster boy of Indian aviation. A sharp networker, he worked his way through India’s bureaucracy to build one of the country’s largest domestic airlines, Jet Airways, with a 21.2 per cent passenger market share as of February 2016.

Born into a Punjabi Bania family in Sangrur, Goyal graduated in commerce from Patiala and moved to Delhi to work as a cashier at his uncle’s travel agency where he learnt the ropes and became an inde­pendent general sales agent. That allowed him to develop connections in the travel trade the world over. In 1969, he was appointed the public relations officer of Iraqi Airways and from 1971 to 1974, became the regional manager for Royal Jordanian Airlines. He also worked in the offices of Middle Eastern Airlines in the country and picked up valu­able lessons in ticketing, reservations and sales before setting up his own agency, Jetair, in 1974 and front-facing for the likes of Cathay Pacific, Air France and Austrian Airlines.

At that juncture, Goyal regularly made trips to the Gulf coun­tries and established strong linkages with Arabs across Dubai, Abu Dhabi, Sharjah, Doha, Bahrain and Dammam. There he set up Tail Winds to cash in on the labour arbitrage that the Gulf states provided back then. Following the oil boom, the Arabs ran people-intensive companies across construction, trade, logistics and transport and signed up with Tail Winds for return tickets to India for their employees on leave. The model worked wonders—the outbound segment from India to the Gulf was sold by Jetair while Tail Winds took over the India-bound trade. While Goyal took care of sales and ticketing outside India, his wife Anita nursed the India business. She was familiar with the tricks of the trade as she worked with him in ticketing and sales in the late 1980s. Eventually, Goyal started getting exclusive contracts from the likes of Royal Jordanian Airlines, Gulf Air, Saudia, Kuwait Airways, Iraqi Airways and Air India. The business arguably honed Goyal’s go-getter attitude and pitchforked him into the limelight.

AT ONE TIME, it is learnt, the Jetair office in India had 17 desks, each representing a different airline. Goyal once took along a visiting team from the International Air Transport Association (IATA) to Agra and presented them with marble-topped furniture worth ₹5 lakh, a princely sum in those days. Conversation followed over lunch and several rounds of tea on buying smaller aircraft. The germ of starting an airline had firmly taken root and there was no stopping Goyal.

In 1993, Jet Airways took off as an air taxi operator with 20 per cent equity stake of Kuwait Airways and Gulf Air, and went on an expansion spree. A policy change in 1997 forbade any foreign airline from entering the domestic skies and both Kuwait Airways and Gulf Air had to exit Jet, now a scheduled carrier. But that was no setback for Goyal as the airline took to its first Chennai-Colombo international route in 2004, and came out with a successful initial public offering (IPO) the following year.

In all his dealings, Goyal’s charm offensive was evident as he notably flew top and middle-ranking mandarins free of charge and allegedly distributed favours across the political spectrum. “He [Goyal] knew how our systems functioned, how to manipulate the political and bureaucratic machinery, how to get policies framed which favour you. Naresh Goyal has been a beneficiary of all those things. He had the requisite power to influence bureaucrats and political people to take decisions the way he wanted,” wrote for­mer Air India Executive Director Jitender Bhargava in a column for Bloomberg Quint in 2019.

Former policy wonk and entrepreneur Sam Pitroda, for instance, was reportedly inducted into the Jet Airways board amid protests by the Left parties for conflict of interest. It is unethical to be on the board of a private company while being part of important advisory panels, they screamed at the time. Pitroda back then was an advisor to the National Advisory Council, and had been advising the prime minister on telecom and education sectors.

Again, in 1997, Goyal is widely held accountable for putting paid to Tata-Singapore Airline’s plans of launching an airline—further bolstering his monopolistic ambitions in the skies. Here, too, then Civil Aviation Minister CM Ibrahim is rumoured to have done his bidding by bringing along the papers of four unions belonging to Indian Airlines who threatened to go on strike if the Tatas’ proposal to start an airline went through. When Ibrahim contended that the workers’ interests must be protected, the prime minister had to relent and the proposal was laid to rest. In his autobiography, An Outsider Everywhere, then Civil Aviation Secretary MK Kaw wrote: “The minister did not clear the file, despite several attempts on my part. The history of civil aviation in this country would have taken a different trajectory if Tata-SIA had been allowed to float an airline.”

Another Ibrahim, too, was closing in on Goyal’s heels. In 1998- 99, based on “threat calls from the underworld” received by the senior management of the now defunct NEPC Airlines, the Goyal- Dawood Ibrahim connection was first probed. Though the Dawood link couldn’t be confirmed, the Intelligence Bureau (IB) claimed that it recorded conversations between Goyal and Dawood with the transcript providing “key leads into their financial dealings”. While Jet Airways denied the allegations with a poker face, political heavyweights who had long enjoyed the airline’s patronage, came to its rescue. It helped to deflect attention and the case was buried.

In 2007, Jet Airways took on a cluttered domestic sky with the likes of Kingfisher Airlines, Air Deccan, SpiceJet, IndiGo and Indian Airlines by gobbling up Air Sahara for ₹1,450 crore. Right after the merger, Jet was faced with financial, legal and personnel issues. Goyal spent too much on the deal to take on the competition ef­fectively and Jet frittered away the IPO funds that remained after placing plane orders. In 2012, Kingfisher shut shop and the low-cost IndiGo soon toppled Jet from its pole position. This was when Goyal decided to go in for a mixed fleet of 10 wide-bodied Airbus A330 and Boeing 777 planes. It proved to be his undoing as such a mix in a small fleet was a sure-shot recipe for inefficiency with costs headed north. Adding fuel to fire, Goyal wanted to configure his fleet “like palaces” with 308 seats against the industry norm of 400. In the process, he lost a fourth of the revenue. Even after the seats were reconfigured to 348, Goyal insisted on retaining eight first-class seats despite the warning that they were nothing short of white elephants in the sky. Alongside, the network planning of the airline went awry as it struggled with scheduling.

Again, Jet was not a leasing company but was forced to lease out its aircraft to the likes of Turkish Airlines, Gulf Air, Thai Airways, Oman Air and Etihad—as many as 70 per cent of its wide-bodied aircraft. Simultaneously, fuel prices soared and the management was hard-pressed to focus on operations.

Then Goyal made another big blunder. In 2013, after several rounds of dealings, Jet offloaded 24 per cent of its stake to Eti­had Airways for $379 million. Fifteen men from Etihad landed in Jet to ‘professionalise’ it and, in the process, turned it into a feeder airline—the routes were changed, branding overhauled and cost overruns flagged. “Etihad’s whole objective of the Jet Airways stake was to make Abu Dhabi financially viable as a hub,” says Mark D Martin, CEO at Martin Consulting. He adds, “Etihad’s core objective was to clean out Jet Airways and its financial stability under overpriced ticket segments onward Abu Dhabi while running aground Jet’s already established, credible global network. Etihad’s approach was identical to what the airline did with Alitalia.” It prompted Goyal to wrest control as Jet shifted its global hub from Brussels to Amster­dam and, in 2017, signed deep commercial agreements with the Air France-KLM combine. He ran the airline again but lost on several opportunities to sell a tardy fleet. In 2013-14, Turkish Airlines showed interest in Jet’s costly A330-200s but the deal fell flat as Goyal struck a hard bargain. Then in 2016, there was an opportunity to sell the entire loss-making ATR fleet, which he again squandered.

In March 2018, Jet received its first major jolt as salaries of top management were cut by 25 per cent and employees’ pay got de­layed. The woes continued into the next year as 100 Jet aircraft had to be grounded. In the fourth quarter of FY18, Jet posted a loss of ₹1,036 crore against a profit of ₹602 crore in the same period a year ago. Though in a mess, Goyal retained control despite potential investors threatening to walk out if he was at the helm. By now, the Tatas, too, were talking to Jet as were Delta Airlines for possible investment but Goyal’s domineering personality warded them off. He was seen as a liability and any revival, if at all, was impossible with him at the helm.

Finally, in March 2019, as more planes got grounded, lender SBI asked Goyal along with three directors to step down. As lenders took over the management and board of Jet Airways, Goyal’s share­holding in the airline plummeted to half of his earlier holding of 50.1 per cent. In April 2019, the airline suspended all flights as cash ran out and banks refused to infuse more money. Not one to let go, the hardnosed Goyal bid for his airline again from London as lend­ers put the airline under the hammer. His offer was rejected.

The trajectory of Naresh Goyal’s rise in India’s aviation coincides with the country’s liberalisation and open skies policy. Entrepre­neurs with high networking skills and derring-do dotted the indus­try landscape wherein some sectors were more equal than others. Aviation was highly capital-intensive and had a long gestation pe­riod, requiring patience and sustainability skills, a total mismatch for a DIY go-getter like Goyal. He lost the plot too soon .

employeesEnforcement DirectorateJet AirwaysmanagementNaresh GoyalSalaries