Headwinds for Jet: Icra further downgrades airline’s rating

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Published: January 3, 2019 2:59:10 AM

Jet Airways shares on Wednesday fell over 6% to close at Rs 263.75 on the BSE.

Jet Airways recorded its lowest domestic market share in five years at 12.8% during November. Its passenger load factor was also down 6% y-o-y to 82.1%, according to the DGCA data.

Credit rating agency Icra on Wednesday announced a further downgrade of Jet Airways’ long-term ratings to ‘D’ after the cash-strapped carrier defaulted on a loan repayment. This is the third such action by the agency since October.
In a late night stock exchange filing on Tuesday, Jet Airways said interest and principal instalment has been delayed “due to temporary cash-flow mismatch”.

According to the ratings agency, the full service carrier has already been delaying its salary payments to employees and lease rental payments to aircraft lessors. Jet Airways had a gross debt of Rs 8,411 crore at the end of September quarter. It has large repayments of Rs 1,700 crore due in December 2018 to March 2019, Rs 2,445.5 crore in FY20 and Rs 2,167.9 crore in FY21.

The Jet Airways crisis emerged after the airline deferred announcement of its Q1FY19 results. It reported a net loss of `1,297 crore during the quarter following which the company CEO Vinay Dube announced several turnaround measures like network rejig, monetisation of customer loyalty programme besides bringing in additional equity.
Since then the airline has initiated talks with Tata group to buy stake, and reportedly held discussions with partner Etihad Airways to bring in fresh capital to tide over the financial crisis.

Recently, it also discussed raising short-term loans worth Rs 1,500 crore with its largest lender State Bank of India.
The ministry of corporate affairs also launched a probe into the alleged siphoning off of funds at Jet in August last year.
During Q2FY19, its revenue increased by 6.9% y-o-y to Rs 6,363 crore, while the yields went down 6% y-o-y to Rs 4.2 per km. The earnings before interest, taxes, depreciation, amortisation and rentals (Ebitdar) plunged 84% y-o-y to Rs 144 crore.

Icra said weak market conditions in the Middle-East and competitive airfares in the domestic market are other major challenges for the airline.

In October, Jet’s long-term borrowing programme was downgraded from BB(-ve) to B(-ve) over delays in the implementation of the proposed liquidity initiatives by the management. There was another downgrade to rating ‘C’ in December on the same grounds.

“The company’s liquidity position is stressed, with operating losses, high debt levels and negative networth,” Icra said in a release.
Nikos Kardassis, the former CEO of Jet Airways, who made a comeback to the carrier in an advisory role and was tasked to turn around the cash-strapped airline, also resigned last month.

Jet Airways recorded its lowest domestic market share in five years at 12.8% during November. Its passenger load factor was also down 6% y-o-y to 82.1%, according to the DGCA data.

Jet Airways shares on Wednesday fell over 6% to close at Rs 263.75 on the BSE.

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