Jet goes to banks for loan moratorium, more cash
Jet Airways has approached banks for a moratorium on loans and asked for fresh funds to ease a cash crunch, according to people with direct knowledge of the matter. This indicates that the carrier is sliding deeper into trouble.
The airline has already grounded about a dozen planes as part of are view of its network aimed at reducing unprofitable domestic routes, said one of the people, who asked not to be identified because the plans aren’ t public. The Mumbai-based carrier isalso studying laying off more employees in non-core areas, the person said.
The moves show India’ s biggest full service carrier—unprofitable in nine of the past 11 years— is struggling for survival as two-cent fares in one of the world' s most expensive places to buy jet fuel ne gate the gains from a surge in domestic passenger numbers. Indian banks, having suffered set backs from lending previously to failed King fisher Airlines, had earlier rebuffed Jet Airways with their reluctance to extend additional loans to the company.
The carrier is continuously evaluating commercial viability of its operations and will make announcements on specific measures, spokesman for the company said in an emailed statement.
“The board approved turn around strategy is under implementation. The strategy encompasses various cost reduction and revenue enhancement initiatives including working on restructuring of our balance sheet via debt-reduction, streamlining cash flows, payroll op timi sat ion, exploring funding options such as capital infusion, mon et is at ion of company’ s stake in its loyalty program, and several other measures, to realise higher productivity and operational efficiencies ,” the company said in the statement. Share soft he company jumped as much as 4 percent on Tuesday in Mumbai, before pa ring their gains to 1.15 percent, on optimism any successful arrangement with lenders could help the carrier get its finances back in order.
Jet Airways has the highest portion of short-term debt to total debt compared to its Asian peer sat 46%. For Naresh Goyal-led JetAirways, it’s critical to raise funds as the airline is battling a depreciating local currency, intense local competition from budget carriers and surging fuel prices. The banks have asked for a detailed action plan from Jet Airways on proposals to sell shares, the people said.
Two-Cent Fares Are Killing Airlines in India' s Cut throat Market
The carrier was one of the first to take off int he early 1990s after India opened up aviation to non-state carriers. Jet Airways has shared little detail sofa turn around plan it announced in August, while the stock has plunged 75 percent this year, shrinking the market value of the company to about $325 million. Among the proposed steps it announced were the sale of the carrier' s stake in its frequent-flier program, capital infusion, paring of debt and cutting costs by as much as 20 billion rupees ($271 million) over the next two years.