JET AIR­WAYS’ EN­GINES STUCK ON DUES

18 en­gines of its Boe­ing 737s stuck at Sin­ga­pore re­pair unit

Business Standard - - FRONT PAGE - ANEESH PHAD­NIS

As many as 18 CFM56 en­gines be­long­ing to Jet Air­ways have been held back by a main­te­nance, re­pair and over­haul (MRO) unit in Sin­ga­pore over un­paid dues.

The en­gines power Boe­ing 737 air­craft and are stuck at ST En­gi­neer­ing’s MRO for months. The lat­ter is de­mand­ing $125-150 mil­lion (~880-1,060 crore) in dues be cleared be­fore these are re­leased, in­dus­try sources said.

With mount­ing losses, Jet has de­faulted on lease and ven­dor pay­ments. Its lessors are con­tem­plat­ing re­pos­sess­ing the planes they had lent.

The MRO de­vel­op­ment high­lights the air­line’s se­ri­ous cash short­age. This has led to the ground­ing of some planes and in the net­work. Jet has 123 planes, in­clud­ing 86 of the Boe­ing 737. Part of the lat­ter are five of the new 737 Max, in­ducted last year.

The 737 Max are pow­ered by CFM Leap-1B en­gines; the plane’s ear­lier vari­ants use CFM56 en­gines.

The air­line has been able to keep a ma­jor­ity of its 737s op­er­a­tional be­cause of spare en­gines in its kitty.

De­lays in fundrais­ing and ac­tion by lessors could lead to more dis­rup­tion. The air­line has ~1,700 crore of loan re­pay­ment due till March and the cred­i­tors and ven­dors are step­ping up pres­sure.

Jet says its op­er­a­tions re­main nor­mal and it is en­gaged with all stake­hold­ers, with whom it has shared a com­pre­hen­sive busi­ness plan. “The shared plan en­vis­ages four key pil­lars of dis­ci­plined growth, com­pet­i­tive cost struc­ture, re­ju­ve­na­tion of cus­tomer ex­pe­ri­ence and a re­struc­tured bal­ance sheet. It is ex­pected to de­liver a pos­i­tive im­pact on the fi­nan­cials, to achieve a sus­tain­able turn­around. Our part­ners were ap­pre­cia­tive of the steps be­ing taken and we con­tinue to be en­gaged with them in real time,” it said.

Also stress­ing: “The com­pany con­tin­ues to run nor­mal op­er­a­tions as per its pub­lished sched­ule, with ad­e­quate spares and ap­pro­pri­ate num­ber of air­craft.” ST En­gi­neer­ing de­clined to com­ment when queried by this pub­li­ca­tion.

En­gine com­po­nents need over­haul or re­plac­ing after 20,000-30,000 flight cy­cles (flights). Apart from the re­place­ment works, the MRO in Sin­ga­pore also works to re­store the per­for­mance of dam­aged en­gines.

Jet’s re­la­tion­ship with ST En­gi­neer­ing dates back to 1993 — the air­line was founded the same year. The MRO ini­tially pro­vided com­po­nent ser­vices for the air­line’s 737 air­craft.

In 2007, this ex­tended to en­gine main­te­nance, with in­duc­tion of the CFM56. In 2010, the two sides signed a power-by-the-hour agree­ment, un­der which an air­line pays a monthly fee to cover all main­te­nance ex­penses.

New main­te­nance agree­ments were signed in 2015 and last Au­gust, cov­er­ing the en­tire fleet of Boe­ing 737 NG air­craft and in­creas­ing the con­tract value, from $350 mil­lion to $700 mil­lion. Sources say the air­line has been un­able to pay on time and dues have ac­cu­mu­lated over time. This is not the first time the air­line has de­layed pay­ing the Sin­ga­pore MRO.

A sim­i­lar sit­u­a­tion had oc­curred in 2012; the dues were cleared fol­low­ing Eti­had’s ac­qui­si­tion of 24 per cent stake in the air­line. Eti­had paid a por­tion of these, later re­cov­ered from Jet, a source said.

De­lays in fundrais­ing and ac­tion by lessors could lead to more dis­rup­tion. The air­line has ~1,700 cr of loan re­pay­ment due till March and the cred­i­tors and ven­dors are step­ping up pres­sure

With mount­ing losses, Jet has de­faulted on lease and ven­dor pay­ments. Its lessors are con­tem­plat­ing re­pos­sess­ing the planes they had lent

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