Jet Airways has appointed global management consulting firm McKinsey & Co to help it chart a turnaround plan even as India’s second-biggest airline struggles to stay afloat and chairman Naresh Goyal approaches peers for infusion of funds.
A senior executive at the airline confirmed that Jet has appointed McKinsey for advising it on cost-cutting measures across functions. It has also roped in Boston Consulting Group to help it with revenue enhancement measures, he added.
The two global consultants have come on board at a time when Jet is grappling with a wide range of problems—financial and operational. It has delayed salaries, grounded at least eight planes, retrenched at least 20 managers, and allegedly featured in watch-lists of its lenders for likely defaults.
“As communicated earlier, Jet Airways is already engaged in implementing the various elements of its turnaround strategy. Such initiatives typically require inputs from external advisers/specialised consultants,” a spokesperson told ET.
Jet has appointed consultants in the past, including global turnaround management expert Alvarez and Marsal, which worked with the airline for 15 months until 2015. Seabury Group had also come on board in 2013 just after Etihad Airways bought a 24% stake in the airline.
Both times, Jet had been in a precarious financial situation facing depleting cash reserves and mounting debt. At least two of the big four accounting companies, KPMG, Deloitte, PwC and EY, have been appointed.
A person in the know said last year Jet had enlisted the services of four small firms, including the National Institute of Industrial Engineering, to come up with strategies to improve its engineering department. “Only Jet can appoint two consultants for the work of one,” said an executive at a consulting company.
Several suggestions from both Seabury and Alvarez on streamlining operations and rationalising manpower were not implemented, said an industry executive, referring to the outcome of earlier engagements.
For the last couple of months, Jet has divided salary payments into two equal tranches, but it has been unable to pay even the deferred 50% on time. In August, the airline’s senior management took pay cuts of 25%. It asked pilots and technicians to take similar cuts but they refused.
Credit rating agency ICRA has already down graded Jet Airways’ long-term borrowing programme. Jet is in talks with investors to sell a stake in Jet Privilege, the loyalty programme it co-owns with Etihad. It has also been wooing its commercial partners Delta Air Lines, Air France-KLM and conglomerates such as Tata Sons to sell a stake in the airline business.
Sourced from the Economic Times Kala Vijayraghavan, Anirban Chowdhury,