Eti­had Con­di­tions Cloud Jet Res­cue Mis­sion

It’s not clear if Jet’s over­seas lenders HSBC Dubai and Mashreq will pro­vide fur­ther credit to the trou­bled air­line and join any plan to re­vive it Talks stuck as Gulf part­ner is against pledg­ing shares and wants Goyal di­vested of de­ci­sion-mak­ing pow­ers

The Economic Times - - Front Page -

Jit­tery Jet

Ac­cu­mu­lated loss (Fig­ures in crore) Net worth Net Debt Other con­di­tions in­clude slash­ing Naresh Goyal’s share­hold­ing to around from and strip­ping him of de­ci­sion-mak­ing pow­ers

22%

Anir­ban Chowd­hury & Su­gata Ghosh

Mum­bai: Talks among Jet Air­ways, its lenders and part­ner Eti­had Air­ways over a pos­si­ble res­cue are stuck over sev­eral stip­u­la­tions by the Gulf car­rier for mak­ing any fur­ther in­vest­ment, par­tic­u­larly that it won’t pledge its shares as col­lat­eral against loans to the In­dian car­rier, said two peo­ple aware of the mat­ter.

Eti­had cur­rently owns 24% of Jet, which has asked the Abu Dhabi car­rier to put in more money by way of ad­di­tional eq­uity. Banks have re­fused any liq­uid­ity as­sis­tance for Jet un­til it gets eq­uity fund­ing from ex­ist­ing share­hold­ers. Re­pay­ment obli­ga­tions till FY21:

51%

Mar­ket cap as on Fri­day: Stock price ero­sion in 12 months:

13,000 9,768 8,000 6,000 2,880

Other Eti­had con­di­tions in­clude slash­ing founder-chair­man Naresh Goyal’s share­hold­ing to around 22% from 51% and strip­ping him of de­ci­sion-mak­ing pow­ers. Jet’s In­dian lenders will ex­tend ad­di­tional debt of twice the amount that Eti­had in­vests as eq­uity, sources said.

It’s not clear if HSBC Dubai and Mashreq, over­seas lenders to Jet, will pro­vide fur­ther credit and join any plan to re­vive Jet. The two cur­rently en­joy guar­an­tees from Eti­had for some of their ex­po­sure.

When con­tacted, Eti­had and Jet de­clined to re­spond to what they termed as ‘spec­u­la­tion’.

Eti­had’s con­di­tions will likely de­lay a bailout. In­dia’s sec­ond-big­gest air­line by mar­ket share is fac­ing the worst fi­nan­cial cri­sis in its 25-year ex­is­tence, strapped for cash, laden with losses and debt.

Jet de­faulted on loan re­pay­ments in De­cem­ber, de­layed em­ployee salaries through­out last year and failed to pay air­craft lessors in time.

In­dia’s smart­phone mar­ket al­most dou­bled to 150 mil­lion units in 2018 from about 80 mil­lion in 2014. Com­par­a­tively, Ap­ple’s ship­ments have risen to 1.6-1.7 mil­lion now — a mar­ket share of about 1.2% — com­pared with 1.5 mil­lion in 2014, ac­cord­ing to Coun­ter­point.

An­a­lysts said the slump in 2018 can be at­trib­uted to in­tense com­pe­ti­tion and the $1,000 price tags of the new iPhone models, which failed to at­tract buy­ers even after of­fer­ing EMI schemes, zero down-pay­ment and cash­back plans. Some of­fers on older models such as iPhone 8 and 8 Plus also didn’t work, said an­a­lysts.

In­dia added to Ap­ple’s prob­lems across the globe in 2018, specif­i­cally slow­ing eco­nomic growth in China, due to which the com­pany low­ered its rev­enue fore­cast for its fis­cal first quar­ter ended De­cem­ber 29 to $84 bil­lion. In Novem­ber, it had pegged first-quar­ter rev­enue at be­tween $89 bil­lion and $93 bil­lion.

Ap­ple de­clined to com­ment to ET’s emailed queries.

IN­DIA BUSI­NESS

Ap­ple’s In­dia busi­ness grew from $100-200 mil­lion a few years ago to over $2 bil­lion in 2016 and flat­tened out after that, Ap­ple CEO Tim Cook said in an in­ter­view to CNBC last week.

Ap­ple still con­sid­ers In­dia an im­por­tant mar­ket and has “more work to do,” Cook said in the in­ter­view, adding that it wants to get bet- ter re­sults in the fu­ture. The Cu­per­tino-based com­pany wants to open its own stores in In­dia and would like du­ties on its prod­ucts to be cut.

“For Ap­ple, 2018 has been a dis­as­trous year in In­dia… while Ap­ple is still the favoured as­pi­ra­tional brand in In­dia, it has def­i­nitely slipped. In com­par­i­son, the An­droid smart­phone mar­ket in In­dia is one that is thriv­ing and full of in­no­va­tion,” said Prabhu Ram, head-in­dus­try in­tel­li­gence group at Cy­berMe­dia Re­search.

CMR an­tic­i­pates an al­most 45% de­cline on year in iPhone ship­ments in Q4 2018 and ship­ments of 2 mil­lion units for the full cal­en­dar year.

STICK­I­NESS FAC­TOR

Coun­ter­point’s Shah said the stick­i­ness fac­tor for iPhones is re­duc­ing fast be­cause phones have be­come a com­mod­ity.

“Chi­nese brands have 3040% cheaper pric­ing than Ap­ple. It doesn’t make sense to pay sky-high prices for a prod­uct that doesn’t have new fea­tures,” he said, adding that iPhones won’t even sup­port 5G un­til 2020.

The prices of iPhones are shrink­ing its po­ten­tial base, even among ex­ist­ing users who are due to re­place their de­vices, ac­cord­ing to techARC an­a­lyst Faisal Ka­woosa.

Me­dia re­ports said Ap­ple may as­sem­ble its top-end iPhones in In­dia through the lo­cal unit of Fox­conn Tech­nol­ogy Co. this year, a move that could re­sult in cost sav­ings that can be passed on to con­sumers.

ARINDAM

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