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

29 January 2019 Consultancy.in

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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