Jet board allows lenders to convert debt into equity
Jet plunged to a ₹588 cr loss, from a net profit of ₹165 cr a year ago
: Jet Airways (India) Ltd on Thursday approved a plan that would allow its domestic lenders, led by the State Bank of India (SBI), to convert their loans into equity, making them the largest shareholders of the cash-strapped airline.
Jet Airways, meanwhile, reported its fourth straight quarterly loss, adding to the woes of the carrier hammered by higher costs and fierce competition from budget airlines.
In the three months through December, the airline plunged to a loss of ₹587.77 crore, from a net profit of ₹165.25 crore a year earlier. The earnings, however, topped the ₹643.3 crore loss forecast in a Bloomberg survey of three analysts.
Expenses during the quarter rose 12% to ₹6,786.15 crore from a year earlier. It included fuel costs of ₹2,387.72 crore, a 30% increase from the year earlier.
Post the board decision, Jet Airways would seek approval from its shareholders in an extraordinary general meeting on February 21 to convert the debt into 114 million shares and allot them to the lenders.
The proposal to convert loans into equity was made after the Mumbai-based carrier defaulted on payments, including interest to the banks in December. Jet Airways had a gross debt of ₹8,411 crore as of end-September including aircraft debt of ₹1,851 crore.
Jet Airways has been struggling with cash flows for the past six months because of rising fuel costs. The cash crunch forced the airline to delay salaries to pilots and interest payments on its debt.
“We are indebted to our employees who, despite our interim challenges, have worked tirelessly to ensure the highest levels of operational reliability and customer services for our guests, in line with our core values,” Jet Airways’ chief executive officer Vinay Dube said in a statement.
The Bank-Led Provisional Resolution Plan (BLPRP), approved by the board, proposes restructuring under the provisions of the Reserve Bank of India (RBI) in order to meet a funding gap of nearly ₹8,500 crore, which is to be met through a mix of equity infusion, debt restructuring, sale and sale and lease back of aircraft, refinancing of aircraft, among others.
“Jet Airways continues to make steady progress on its operational and financial turnaround and with today’s approval of the Bank-Led Provisional Resolution Plan by the board of directors of the company, we remain confident of delivering a more strategic, efficient and financially viable airline,” Dube said.
At the extraordinary general meeting (EGM), shareholders would also vote on a proposal to raise its authorized share capital from ₹200 crore to ₹2,200 crore through a special resolution.
“The BLPRP envisages the company receiving the requisite approvals from shareholders at
JET HAD A GROSS DEBT OF ₹8,411 CRORE AS OF END-SEPTEMBER INCLUDING, AIRCRAFT DEBT OF ₹1,851 CRORE
their meeting scheduled to be held on February 21, 2019 for conversion of lenders’ debt into appropriate equity shares that would result in the lenders becoming the largest shareholders in the company, and, appointment of lenders’ nominees to the board of directors of the company under the provisions of the RBI circular,” Jet Airways said in a statement.
Additionally, the BLPRP also envisages sanction of interim credit facilities by domestic lenders on terms to be agreed, as well as, appropriate governance structure including the board composition in accordance with applicable statutory and regulatory requirements, the airline said.
The BLPRP will be presented to the banks, an overseeing committee of the Indian Bankers’ Association, the board of Etihad Airways, which owns a 24% stake in Jet Airways, and the air- line’s promoter and chairman Naresh Goyal, it said, adding that implementation of the BLPRP is subject to receiving regulatory and other approvals. Meanwhile, Jet Airways’ revenue in the December quarter fell to ₹6,198.38 crore, from ₹6,207.83 crore a year earlier.
The figure missed Bloomberg’s survey of three analysts which had expected the airline to report revenue of ₹6,450.4 crore.
Analysts tracking the sector attributed Jet Airways’ loss in the latest quarter to high costs and its inability to match fares offered by budget airlines.
“The aggressive pricing strategies adopted by budget carriers have hurt Jet Airways adversely once again this quarter,” said an analyst with a foreign brokerage.
The airline trimmed total capacity during the December quarter. To cut costs, it either shut or reduced flights to unprofitable routes in the quarter.
Also, few lessors have also sought to repossess their planes after the airline failed to pay lease rentals. Jet Airways carried 7.17 million passengers last quarter, a 6.9% decline from the year earlier.