Alvarez & Marsal to conduct due diligence on Jet Airways for Etihad

29 January 2019

Following a period of sustained financial trouble, India’s second largest airline Jet Airways may be rescued by Abu Dhabi based Etihad airways, a scenario that is contingent on the results of due diligence proceedings currently being conducted by global restructuring consultancy Alvarez & Marsal.

Jet Airways has had a poor period over the last two years in terms of financial stability, having undergone a dip of 2% in the National Stock Exchange. The dip is just the tip of the iceberg, and is the result of declining revenues and the consequent failure to pay salaries, in addition to large cuts in management staff.

The airline appointed global management consultancies McKinsey & Company and the Boston Consulting Group late last year with the hopes of turning its operations around. McKinsey is tasked with enforcing some degree of stability by bringing the falling stock value back under control.

BCG, meanwhile, is tasked with strategising to renew the airline’s revenue stream. Some hope has now been injected into the airline’s future prospects, as Etihad airways has declared its intentions to consider bailing Jet Airways out by increasing its share in the airline’s stock.

Alvarez & Marsal to conduct due diligence on Jet Airways for Etihad

Currently, Etihad controls 24% of Jet Airways, and is willing to increase this share provided that the Founder and Chairman of the latter – Naresh Goyal – gives up control of the airline, according to Reuters. Etihad has now appointed Alvarez & Marsal to ensure operational optimisation at Jet Airways. 

The consulting firm specialises in restructuring and has been appointed with the objective of conducting due diligence at Jet Airways before Etihad comes to a decision to bail it out. The firm’s history with restructuring has led some to predict that further cuts will be made in expenditure and staff at Jet Airways.

Representatives from Alvarez & Marsal are now stationed in Jet Airways’ Mumbai offices, joining other officials currently stationed there by McKinsey & BCG. The airline is open to the increase in share value from Etihad, primarily due to its need to cover its substantial debt.

The woes at Jet Airways – which controls over 15% of India’s aviation industry – is representative of overall trouble in the sector. Airlines such as Kingfisher have been forced to shutdown, which public sector airline Air India is also currently employing the support of consultants to contend with bankruptcy.

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EY selected to conduct audit on Jet Airways for creditors consortium

04 April 2019

As Jet Airways continues its efforts to stabilise its financial situation, creditors to the airline – led by the State Bank of India – are set to appoint global professional services firm EY as the auditors for the airline. EY was selected over Big Four rival Deloitte after careful consideration by the interim management committee.

The interim management committee itself is currently being formed, but sources have indicated to the Economic Times that Big Four accounting and advisory firm EY will be the auditor of choice once the committee is formed. The indication comes after EY was already appointed for a forensic audit in December.

Jet Airways has been struggling financially for several months now, which has had repercussions on its internal operations as well as on its value in the stock exchange, which had dipped by 2% at the start of December last year. Internally, the firm has been forced to ground flights and delay salary payments, leading to considerable backlash.

Currently, the airline has a fleet of 35 aircraft in circulation, as opposed to nearly 120 aircraft when it was operating in relative financial stability. A number of consulting firms have since ben involved in rescuing the airline’s finances. In December, Jet Airways appointed McKinsey & Company as well as BCG for support.

EY selected to conduct audit on Jet Airways for creditors consortium

While McKinsey & Company was tasked with damage control strategies to help cut down operational costs, BCG was tasked with devising new strategies to regenerate previous levels of revenue. Meanwhile, a number of external parties have been interested in offering financial aid to the airline.

Earlier this year, Eithad Airways appointed global consultancy firm Alvarez & Marsal to conduct due diligence on Jet Airways, before finalizing their intentions of increasing their ownership share beyond the current level of 24%. The conditions for this takeover would be the surrender of control by Founder and Chairman at Jet Airways Naresh Goyal.

Meanwhile, the creditors that are looking to offer financial support to the airline have also been seeking support with auditing the company. A consortium of creditors led by the State Bank of India appointed EY to conduct a forensic audit of the airline late last year, and are now looking to extend this collaboration.

The interim management committee reportedly considered a number of major consulting firms for the role of auditor, including fellow Big Four accounting and advisory firm Deloitte. Following the audits, the creditors will move to acquire a 50% ownership in the airline through the conversion of debt into equity.