An Airbus SAS A330 aircraft by Jet Airways India Ltd. approaches to land at Chhatrapati Shivaji International Airport in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Jet Airways Seeks Loan Moratorium to Ease Cash Crunch

(Bloomberg) -- Jet Airways India Ltd. has approached banks for a moratorium on loans and asked for fresh funds to ease a cash crunch, according to people with direct knowledge of the matter, adding to signs the carrier is sliding deeper into trouble.

The airline has already grounded about a dozen planes as part of a review of its network aimed at reducing unprofitable domestic routes, said one of the people, who asked not to be identified because the plans aren’t public. The Mumbai-based carrier is also studying laying off more employees in non-core areas, the person said.

The moves show India’s biggest full-service carrier -- unprofitable in nine of the past 11 years -- is struggling for survival as two-cent fares in one of the world’s most expensive places to buy jet fuel negate the gains from a surge in domestic passenger numbers. Indian banks, having suffered setbacks from lending previously to failed Kingfisher Airlines, had earlier rebuffed Jet Airways with their reluctance to extend additional loans to the company.

The carrier is continuously evaluating commercial viability of its operations and will make announcements on specific measures, spokesman for the company said in an emailed statement.

“The board approved turnaround strategy is under implementation. The strategy encompasses various cost-reduction and revenue enhancement initiatives including working on restructuring of our balance sheet via debt-reduction, streamlining cash flows, payroll optimization, exploring funding options such as capital infusion, monetization of company’s stake in its loyalty program, and several other measures, to realize higher productivity and operational efficiencies,” the company said in the statement.

Shares of the company jumped as much as 4 percent on Tuesday in Mumbai, before paring their gains to 1.15 percent, on optimism any successful arrangement with lenders could help the carrier get its finances back in order.

Jet Airways has the highest portion of short-term debt to total debt compared to its Asian peers at 46%.

Jet Airways Seeks Loan Moratorium to Ease Cash Crunch

For Naresh Goyal-led Jet Airways, it’s critical to raise funds as the airline is battling a depreciating local currency, intense local competition from budget carriers and surging fuel prices. The banks have asked for a detailed action plan from Jet Airways on proposals to sell shares, the people said.

The carrier was one of the first to take off in the early 1990s after India opened up aviation to non-state carriers. Jet Airways has shared little details of a turnaround plan it announced in August, while the stock has plunged 75 percent this year, shrinking the market value of the company to about $325 million.

Among the proposed steps it announced were the sale of the carrier’s stake in its frequent-flier program, capital infusion, paring of debt and cutting costs by as much as 20 billion rupees ($271 million) over the next two years. While Blackstone Group LP and TPG Capital were reportedly in talks for the stake in the loyalty program, JetPrivilege, the carrier hasn’t given any indication it is anywhere close to a deal.

Jet Airways owns 49.9 percent of JetPrivilege, with the rest held by Etihad Airways PJSC, which separately owns 24 percent of the Indian carrier.

Jet Airways Seeks Loan Moratorium to Ease Cash Crunch

Cash and equivalents at Jet Airways dwindled to 3.2 billion rupees as of March, from as high as 20.8 billion rupees three years earlier, signaling the urgency to raise capital and tide over any squeeze.

Net debt was at 73.6 billion rupees as of June 30, 65 percent of that denominated in dollars, Chief Financial Officer Amit Agarwal said in August. The local currency’s 13 percent slide against the greenback is making matters worse by threatening to drive up plane financing costs.

Jet Airways has 124 aircraft in its fleet, according to its website, compared with IndiGo’s 159 as of end-March.

©2018 Bloomberg L.P.