Etihad taps Alvarez & Marsal for potential Jet Airways turnaround

A team of Alvarez & Marsal turnaround specialists is presently conducting an on-the-ground due diligence examination of Jet Airways according to Reuters, brought in at the behest of Etihad which is reportedly considering increasing its stake in the beleaguered airline.

Abu Dhabi national carrier Etihad – a 24 percent Jet Airways stake-holder – has appointed management consultancy Alvarez & Marsal to carry out due diligence on the stuttering Indian airline as it considers a bail-out according to a new report from Reuters, with a team from A&M already said to be ‘camped’ at Jet Airways’ offices in Mumbai assessing the airline’s operations and financial records.

While Alvarez & Marsal has so far yet to comment on the report, Reuters has cited three unnamed sources familiar with the matter, one of who was quoted as saying, “Alvarez & Marsal are restructuring consultants. If they are there it means they are looking for stuff to cut.” As it stands, Jet Airways is some $1.14 billion in debt, with its profitability hit by increased competition, currency depreciation, and high fuel costs.

Jet Airways toward the end of last year tapped both McKinsey & Company and Boston Consulting Group in a bid to chart a path to recovery, with McKinsey said to be advising on cost-cutting measures and BCG looking at avenues to increase revenue. “Only Jet can appoint two consultants for the work of one,” quipped an unnamed consulting executive at the time. Alvarez & Marsal has itself worked with the airline in the past, for more than a year up until 2015, as well as earlier Seabury Consulting – which is now part of Accenture.

Goldman Sachs was also brought on board by Jet Airways late last year to help identify and scout for potential investors for a cash injection, with Etihad meeting with Jet officials earlier this month to discuss a bail-out. Unfortunately for the airline’s founder and chairman Naresh Goyal, the potential rescue may not be enough to save his skin, with Etihad reportedly wanting Goyal to give up control as a condition of its potentially increased holdings.

Currently at a 24 percent stake, Etihad – which also holds shares in Virgin Australia, Air Serbia and Air Seychelles – can increase its holdings in Jet Airways to 49 percent according to India’s foreign ownership regulations, while it will face strict capital market rules should it climb above its current stake. Jet Airways, meanwhile, is said to control one sixth of India’s burgeoning aviation market, which is on track to become the world’s third largest within just five years.

Driven by ever-lower passenger fares, the increased competition both locally and regionally has however put greater pressure on numerous Asian airlines to cut costs, restructure and innovate – a lucrative development for the world’s tech and management consultancies. Locally, Ernst & Young was appointed by the Indian government on an Air India divestment, while further afield Hong Kong’s Cathay Pacific brought in McKinsey to guide its transformation.