Jet Airways crisis deepens: Airline forced to ground two more aircraft, 25 out of service now

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Updated: March 5, 2019 7:02:13 AM

In February, an official from Aviation Partners, which is leased five Boeing 737 800 aircraft to Jet, said the company hasn’t received any payments since October last year.

Meanwhile, Jet Airways founder Naresh Goyal may be willing to step down as chairman of the airline’s board.

Jet Airways has been forced to ground two more aircraft due to non-payment of lease rental, the airline said in an exchange filing on Monday. With this, a total of 25 aircraft have been grounded in less than a month for unpaid dues, including the newly introduced Boeing 737 Max, Boeing 737 NG and Airbus A330 planes. The airline has been compelled to cancel nearly 200 domestic flights every day, approximately a third of the daily schedule of 600 flights.

The beleaguered airline, which is looking for an investor to bail it out, is negotiating with lessors, the management said.
According to a senior Directorate General of Civil Aviation (DGCA) official, cancellations by Mumbai-based Jet Airways have nearly doubled to 200 per day from 100-odd flights in December.

Jet did not respond to FE’s queries sent till the time of going to press. The full-service carrier had, on March 2, grounded two aircraft due to non-payment of amounts outstanding to lessors.

The official said at least seven more aircraft, including ATR turboprop jets, have been taken off the fleet for lack of spares. “There has been no notice for de-registration (of aircraft) so far,” the official added.

Last week, civil aviation secretary Pradeep Singh Kharola had said flight cancellations by Jet were very high.

“The DGCA is monitoring the grounding of aircraft and flight cancellation which is very high currently,” Kharola told reporters on the sidelines of CII’s Aviation Conclave on Wednesday.

After announcing the grounding of four of its planes on February 7 for non-payment to lessors, the airline took another two aircraft out of operations due to similar reasons on February 23. On February 27 and 28, Jet Airways grounded seven and six aircraft, respectively, due to the non-payment of lease rentals. Later, two aircraft were grounded on March 1 and as many on March 2.

According to sources, Jet’s equity partner Etihad Airways may be unwilling to infuse any funds in the interim in the cash-strapped carrier. The Abu Dhabi-based airline, which has a 24% stake in Jet, is believed to have decided to infuse funds only after the bank-led resolution plan (BLRP), which is being piloted by State Bank of India, is finalised and approved.

Meanwhile, Jet Airways founder Naresh Goyal may be willing to step down as chairman of the airline’s board.

Since the BLRP’s finalisation and approval from all the concerned stakeholders will take time, the airline needed funds in the interim to pay its pilots, vendors and aircraft leasing firms.

As is known, the bank-led resolution plan includes infusion of funds, restructuring of debt and the monetisation of assets. The BLRP has estimated a funding gap of around `8,500 crore (including proposed repayment of aircraft debt of around `1,700 crore) which will be met by appropriate mix of equity infusion, debt restructuring, sale/sale and leaseback/refinancing of aircraft, among others.
Once approved by all the required sections, lenders led by SBI would become the largest stakeholders in the airline. The stake of Goyal would come down to around 20-22% from the current 51%.

According to the monthly passenger data, Jet’s domestic passenger count was down 9% year-on-year during January while its market fell to 11.9% — the lowest in at least five years — behind national carrier Air India’s 12.2%. In February, an official from Aviation Partners, which is leased five Boeing 737 800 aircraft to Jet, said the company hasn’t received any payments since October last year.

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