India’s Struggling Jet Airways Flags Bailout Options
(Bloomberg) -- Jet Airways India Ltd. is working with lenders to revamp its debt as the struggling carrier tries to shore up its financials after recording losses in nine of the past eleven years in a market known for ultra-low fares.
The carrier is working on “various options on the debt-equity mix, proportion of equity infusion,” the Mumbai-based company said in a statement on Wednesday.
Among options considered by the lenders led by State Bank of India Ltd. is to seek 35 billion rupees of investment from Jet’s founder Naresh Goyal and Etihad Airways PJSC, which owns 24 percent in the company, before they restructure the debt, people with knowledge of the matter said. They asked not to be identified as the talks are private. No final decision has been taken.
Budget airlines have expanded exponentially in India in the past decade, luring first-time flyers and giving middle-class families an alternative to full-service carriers like Jet, which offered lounges and free meals on board. While one of the world’s fastest-growing major aviation markets, India has proven tough for airlines with premium carrier Kingfisher Airlines collapsing and the state-owned Air India needing repeated bailouts as cheaper fares failed to cover their costs.
“The resolution plan is presently under active discussion amongst the stakeholders,” Jet said in the statement.
Jet Airways has 80.5 billion rupees ($1.1 billion) of debt and the restructuring may lead to a change in the board of Asia’s worst-performing airline stock.
The carrier, which has accumulated more losses than any other publicly-traded carrier in Asia apart from Pakistan International Airlines Corp., has been in talks with Etihad as well as the Tata Group for a rescue package. Potential investors have sought the removal of Goyal from the board, the people said. The bailout comes at a difficult time for Etihad as it is itself cutting jobs and shrinking its fleet amid mounting losses.
Jet Airways had 16.8 billion rupees of cash as of Sept. 30, according to data compiled by Bloomberg. That compares with 127 billion rupees at InterGlobe Aviation Ltd., which runs IndiGo, India’s biggest airline. Jet’s shares have dropped 66 percent in the past year making it Asia’s worst performing airline stock.
The company’s credit rating was cut to default this month after saying it had missed a payment. The proposed equity infusion may see Etihad’s stake in the company increase to 49 percent, India’s BTVI channel reported on Monday.
Jet Airways, India’s biggest full-service airline, had failed to post a profit last year as fare wars depressed revenue and turbulent oil prices led to a jump in costs. A failed rescue will spell lost investments and mounting losses for Jet’s investors and more soured loans for lenders.
Etihad, which lost $3.5 billion over two years, last week scrapped orders for 10 Airbus SE A320neo aircraft and revealed plans to cut 50 pilot posts this month. Chief Executive Officer Tony Douglas has put the brakes on a costly bid to challenge bigger Gulf rivals Emirates and Qatar Airways, saying he’ll focus more on local needs rather than carrying passengers between continents.
©2019 Bloomberg L.P.