Boeing to return $200 million to debt-ridden Jet Airways

By: | Published: August 28, 2018 4:27 AM

To help crisis-ridden Jet Airways, US aircraft manufacturer Boeing is understood to be returning a portion of the amount paid by the carrier to procure 75 Boeing 737 Max. Sources said Boeing is likely to return around $200 million to Jet.

In 2015, Jet Airways had placed an order for 75 Boeing 737 Max aircraft and followed it up with two more tranches of order for the same type of aircraft, thus taking the total order for Boeing 737 Max to 225.

To help crisis-ridden Jet Airways, US aircraft manufacturer Boeing is understood to be returning a portion of the amount paid by the carrier to procure 75 Boeing 737 Max. Sources said Boeing is likely to return around $200 million to Jet.

Pre-delivery amount is the amount airlines pay as an advance commitment for fulfiling an order.

In 2015, Jet Airways had placed an order for 75 Boeing 737 Max aircraft and followed it up with two more tranches of order for the same type of aircraft, thus taking the total order for Boeing 737 Max to 225.

Generally, aircraft order works on a sale and lease back model. The airline placing the order for aircraft makes a payment of around 20-30% of the cost.

Subsequently, at the time of delivery the lessor does the final payment on behalf of the airline and then leases it the aircraft.

Jet had not specified the exact value or the aircraft variants but on list price a Max 737 retails at $117.1 million per aircraft.

Sources said by extending a helping hand to Jet, Boeing may have sealed a long-term relationship with the carrier.

When asked about the deal, a Jet Airways spokesperson said, “Jet Airways remains committed to turn around its business for which it continuously evaluates various funding options to meet its liquidity requirements on priority. We are unable to comment on any specific proceeding.”

Boeing did not respond to FE’s query.

Mark Martin, founder and CEO at UAE-based Martin Consulting, an aviation and airlines consulting firm described this funding by Boeing as an industry practice and a win-win for both, the manufacturer who is able to sell more planes, and the buyer, in this case Jet.

As reported earlier, the troubled carrier is also in talks with private equity players to raise around $500 million against its flying miles programme.

Jet Airways’ debt as on March 31, 2018, is Rs 9,425.31 crore along with other liabilities amounting to Rs 11,539 crore, a negative networth of Rs 7,139 crore and Rs 10,772 in accumulated losses.

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