Jet Airways crisis: Lessors to deregister 15 grounded aircraft

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Updated: April 6, 2019 6:54:05 AM

Jet's lenders, led by State Bank of India (SBI), last month agreed to bailout the airline in a complex deal that involved the banks taking a majority stake in the company, while they continue looking for a new investor, and providing a fresh loan of $218 million.

grounded Jet Airways planes, Jet Airways, Jet Airways news, naresh goyalLessors plans to deregister 15 grounded Jet Airways planes

Lessors to Jet Airways are planning to ask aviation regulator Directorate General of Civil Aviation (DGCA) to deregister many more planes leased to the airline, three sources said, signalling a planned bailout of the debt-laden carrier is failing to assuage their concerns. About six lessors are expected to apply to the DGCA to deregister up to 15 planes that have already been grounded, over the next 10 days, one of the sources with direct knowledge of the matter said. This is in addition to the five planes that MC Aviation Partners, a subsidiary of Mitsubishi, applied on Friday to deregister, the source said. Once deregistered, lessors can take the plane out of the country and lease them to other airlines.

While some lessors have already taken their planes out after a mutual agreement with Jet, sources say the latest applications to do so are on a non-consensual basis. This deepens the crisis for Jet that has had to ground more than three-quarters of its fleet of 119 planes, many due to non-payment to lessors, leading to hundreds of flight cancellations. It was not immediately clear which of its lessors were planning to apply for deregistration in the coming days.

About 100 of Jet’s 119 mainly Boeing planes are leased by companies such as Avolon, GE Capital Aviation Services and AerCap Holdings. Avolon, one of the world’s biggest aircraft lessors, on Thursday applied to the DGCA to take two of its planes placed with Jet outside of India, making it the first to pull planes out on a non-consensual basis.

“The lessors are really hassled,” said one of the sources, declining to be identified as the discussions were private. “Nobody wants to take risks.” Jet, the country’s oldest private carrier now controlled by its lenders, did not respond to requests for comment.

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Reflecting the overall risk-off sentiment, Indian Oil halted jet fuel supplies to the airline from Friday noon, saying it hopes to soon resolve payment issue with Jet. Jet shares ended down 1.6% on the BSE on Friday. India is keen to save Jet to prevent thousands of job losses, which could potentially dent sentiment days ahead a general election in which Prime Minister Narendra Modi seeks to secure a second term.

Jet’s lenders, led by State Bank of India (SBI), last month agreed to bailout the airline in a complex deal that involved the banks taking a majority stake in the company, while they continue looking for a new investor, and providing a fresh loan of $218 million. The lenders said late on Thursday they intended to push forward with their plan but offered no clarity on the interim funding.

Some lessors have been sceptical about whether this proposed bailout can clear their dues on time. Several have not been paid for five to six months, a source has told Reuters. “It’s getting down to the wire. If nothing comes out by next week, I think it’s done,” said another source.

After Kingfisher Airlines’ disorderly collapse in 2012, India modified rules in line with the Cape Town convention, an international treaty that makes it easier for foreign lessors to repossess aircraft during payment defaults. In theory, lessors have the option to file a complaint with the DGCA, which in turn can cancel a plane’s registration within five working days. But this is subject to some conditions such as clearing dues owed to airport operators, fuel vendors, tax authorities and other private entities.

The government also needs to revise some local laws that conflict with the full implementation of the convention, making it a more complicated process in India than in some other countries.

By Aditya Kalra & Aditi Shah

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