Dhaka: In a stock exchange announcement on February 14, the board of India’s Jet Airways approved a $1.2bn rescue package plan to bolster its finances and keep planes flying in the air as the struggling carrier faced its fourth consecutive quarterly loss.
Jet announced a draft plan that would see lenders, led by the State Bank of India, convert debt into equity and make them the largest shareholders.
The plan estimates a funding gap of approximately Rs 85bn ($1.2bn), which is to be met by a mix of new equity, debt restructuring and sale-or-leaseback of aircraft, said the statement.
The plan, which will allow lenders to nominate directors to its board, will be presented for approval at a Jet shareholder meeting on February 21. It will be considered by the lenders, a committee of the Indian Banks’ Association; Etihad Airways, the Abu Dhabi carrier that owns 24 per cent of Jet; and Naresh Goyal, founder and chairman of Jet.
“It’s a rescue package that works for everyone; the lenders will be in the driving seat,” said Kapil Kaul, Chief, South Asia, Centre for Asia Pacific Aviation.
“Now we’ll wait to see the structure of the shareholding and, most importantly, how lenders take the next steps in terms of governance and quality of the board,” he added.
The airline reported a net loss of Rs 5.9bn for three months to December, down from a loss of Rs 13bn in the September quarter.
Analysts expected the losses as Indian airlines reeled from the impact of higher oil prices, a weak rupee and ferocious competition. Rivals SpiceJet and Indigo also saw their profits decrease.
But Jet, which has 124 aircrafts in its ageing fleet, is in particular trouble after losing market share for several years to Indigo, the budget carrier that now dominates the domestic market.
Jet’s problems have compounded the sense of uncertainty surrounding aviation in India, which despite being one of the world’s fastest-growing domestic markets is beset by the financial troubles at some of the country’s biggest carriers. Air India, the national carrier, is still waiting for a bailout from the government following an unsuccessful attempt to privatise it.
In 2012, Kingfisher Airlines collapsed under a mountain of debt, a scenario Indian authorities are reluctant to see again.