Jet defers stake sale of frequent flyer programme
FLIGHT PLAN Firm says it has found potential buyers for sale, SLB of 16 planes
Jet Airways Ltd on Friday deferred plans to sell stake in its frequent flyer programme that the Naresh Goyal-led management had repeatedly called a lifeline for the beleaguered airline, a day after the company approved a bailout plan that takes away Goyal’s position as majority shareholder of the company.
The company has identified potential buyers for sale, and sale and leaseback (SLB) of 16 aircraft, including many wide-body planes owned by the carrier, its chief financial officer Amit Agarwal said in an analyst call. Jet Airways has 123 aircraft, according to its website. Of this, it owns 16 aircraft, mostly wide-body planes. The rest are on SLB from lessors. Proceedings from the sale will be utilized to service debt, Agarwal said. “We will continue to work for JPPL (Jet Privilege Pvt. Ltd) stake sale at a later date,” he said. JPPL was incorporated in 2012 as a wholly-owned unit of Jet Airways, but was hived off as an independent entity in 2014 after Etihad Airways PJSC bought a 50.1% stake for $150 million valuing the firm at $300 million. Etihad’s investment in JPPL was part of its overall $600 million investment in Jet Airways announced in April 2013.
On Point Loyalty, a global management consulting focused on airline loyalty programmes, had valued JPPL at $1.131 billion, or about ₹7,300 crore, last year (based on the average rupee exchange rate in November).
Over the years, frequent-flyer programmes have become profit centres for airlines globally. Many airlines are said to be mak- ing higher profits by tying up with mileage partners such as banks, hotels and credit-card companies. It remains to be seen if under the new ownership of the company, the airline will look to monetize JPPL.
Jet Airways had on 14 February approved a bailout plan that allowed its domestic lenders, led by State Bank of India (SBI), to convert their loans into equity, also making them its largest shareholders. The airline had earlier defaulted on interest payment obligations. The bank-led provisional resolution plan, approved by the board, proposes restructuring under the provisions of the Reserve Bank of India (RBI) to meet a funding gap of nearly ₹8,500 crore.
The gap is to be met through a mix of equity infusion, debt restructuring, sale, SLB, and refinancing of aircraft, among others. “Banks will not become promoters (of Jet Airways),” Agarwal said during the analyst call.
The airline’s chief executive officer Vinay Dube said Jet Airways will remain a professionally-run company where the management reports to the board of directors. The company, which has delayed payment of dues to several of its lessors and vendors, hopes to mitigate the situation in the coming days.
At present, Jet Airways has aircraft-related debt of about ₹1,700 crore. The airline had a net debt of ₹8,052 crore at the end of the September 2018 quarter.
Agarwal said that the airline is working well with all stake holders ‘to manage a win-win situation for all sides” on the issue of overdue of credits.
However, airfares, which had declined because of intense competition among carriers, have seen a rise during the October to December 2018 period.
“BANKS WILL NOT BECOME PROMOTERS (OF JET AIRWAYS)”, SAYS JET AIRWAYS CFO AMIT AGARWAL