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(CNN Business) —  

The founder of India’s Jet Airways has been forced out as part of a government-backed bailout.

Naresh Goyal will quit as chairman and resign from the board, the embattled airline said as it announced a deal that will allow its banks to take control and overhaul the company.

The carrier has been struggling for months to keep its business afloat and Monday’s announcement followed weeks of speculation over its fate.

In a regulatory filing, Jet Airways announced that Goyal and his wife will be stepping down from the board and Goyal will “also cease to be the chairman of the company.”

India’s largest public bank, the State Bank of India (SBI), has been leading the consortium of creditors that will now appoint interim management to run the airline.

The banks have agreed to swap just 1 rupee of debt for 114 million shares in Jet Airways, giving them control.

“We believe that it is in the lenders’ interest, it is in the country’s interest, the aviation sector’s interest that Jet Airways continues to fly,” SBI chairman Rajnish Kumar told reporters last week.

India holds national elections next month and the collapse of a major airline would have put thousands of jobs at risk.

Jet Airways has already canceled thousands of domestic and international flights as planes were grounded over the non-payment of fees to aircraft leasing companies.

Naresh Goyal, who founded Jet Airways in the early 1990s, is stepping down as chairman.
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PHOTO: Divyakant Solanki/EPA-EFE/REX/Shutterstock

It flew about 8,300 flights in February, down from more than 12,000 during the same month last year, according to the Directorate General of Civil Aviation. In 2018, Jet Airways had over 27 million passengers, which is about 19% of all passengers carried by Indian airlines.

India is the fastest-growing aviation market in the world but competition is fierce. Airlines struggle to make money given the intense pressure on fares. Rising oil prices and a plunge in India’s currency have made life even harder.

Jet Airways has racked up huge losses and exhausted the patience of its creditors. Profits at market leader IndiGo have also suffered and the government was forced to pour hundreds of millions of dollars into the national carrier, Air India, after a failed privatization attempt early last year.

Shares in Jet Airways, which have fallen 58% since March 2018, gained about 13% on Monday after the rescue package was announced.

The banks have agreed to provide immediate funding worth about $218 million while they prepare to bring new investors on board, a process the airline said should be completed by June.

Jet Airways said a representative of Etihad Airways, which paid $379 million for a 24% stake in 2013, would also step down from the board. Abu Dhabi’s national airline had been touted as one possible source of new funds, but it has problems of its own after losing about $4.9 billion over three years.

“As always, Etihad continues to work closely with lenders, Jet management and key stakeholders to facilitate a solution for Jet Airways,” an Etihad spokesperson said.

Zahraa Alkhalisi in Dubai contributed to this article.