Lessors to troubled Jet Airways consider taking back aircraft
SINGAPORE/NEWDELHI: Crisis talks between India’s cash-strapped Jet Airways Ltd and aircraft lessors have failed to ease a row over late payments, prompting some lessors to explore taking back aircraft, three people familiar with the matter told Reuters.
In what one of the people described as an ill-tempered showdown between the airline and some of the world’s leading leasing firms, Jet’s main lender State Bank of India sought to provide reassurance that India’s biggest full-service carrier is doing all it can to pay its staff, suppliers and creditors.
“Jet has been delinquent for many months. Nobody wants to get in a situation where the problems worsen and it becomes even more difficult to take out aircraft,” one of the people said.
Jet controls over a sixth of a market experiencing an unprecedented boom in air travel.
Yet high fuel taxes, a weak rupee and price competition have squeezed profitability, leaving Jet with ₹8,052 crore ($1.14 billion) in net debt as at the end of September and defaulting on payments.
The airline had previously told some lessors it would clear arrears by 31 December, but was unable do so, the people close to the matter said.
At meetings on Tuesday, held at SBI’S headquarters in Mumbai’s business district, the bank’s chairman Rajnish Kumar was asked how Jet planned to raise equity or debt, said one of the people—an attendee, who found the responses lacked sufficient detail.
Other attendees included Jet’s management team, includ- ing the airline’s founder and chairman Naresh Goyal, as well as a senior adviser of Etihad Airways, which owns 24% of Jet and which did not provide any assurances, the person said.
An of f i c i al f r om Punjab National Bank later said lenders have “in-principle” agreed to extend some help to Jet, but details on the mechanics of it are still being worked out.
Some lessors have engaged with lawyers, are working with their technical teams about repossession and are monitoring the planes, but the situation could be complicated by a new bankruptcy law that allows up to 270 days where no action is permitted against the debtor or its assets, the person said.
Lessors such as GE Capital Aviation Services, SMBC Aviation Capital and Jackson Square are looking into stopping the transfer of Boeing Co 737 MAX jets that had been due for delivery to Jet, the person said.
A second person said deliveries of 737 MAX jets from lessors had been behind schedule since November.
Avolon, DAE Aerospace, BOC Aviation Ltd and Aircastle Ltd also attended the meetings along with GECAS and SMBC, one of the people said, declining to speci f y which are c onsidering reclaiming planes.
Jet Airways, in a statement on Friday, said the airline is working on its turnaround strategy and updating its partners, in real time, on efforts taken to improve its liquidity.
“A comprehensive plan that will ensure business sustainability, preserve value, and enable the company to honour its obligations was outlined,” a Jet spokesman said in the statement, adding that the meeting took place in an atmosphere of cordiality and mutual appreciation.
The turnaround plan involves creating a competitive cost structure and restructuring the balance sheet, among other t hi ngs, and i s e xpected t o “deliver a positive impact on the financials of the company,” he said. SBI and SMBC Aviation did not immediately respond to requests for comment. The people familiar with the talks were not authorized to speak publicly on the matter and so declined to be identified.