Jet might look at an income of nearly a million dollar per month per aircraft through these wet leases, says expert
Cash-strapped full service airline Jet Airways is in talks with Muscat-based Oman Air to wet-lease three of its widebody aircraft, the A330s, and few of its narrowbody Boeing 737s, sources in the know of the discussions told FE. The number of the Boeing737 aircraft to be leased, however, could not be ascertained. Nearly 150 of Jet’s cabin crew have already been interviewed for the same. A wet lease is a leasing arrangement where an airline owning an aircraft asset provides to the other airline its aircraft with complete crew along with maintenance and insurance (ACMI) expenses and gets paid on per hour basis multiplied by the number of hours that aircraft is flown by the lessee airline.
“Wet lease works brilliantly for Jet under current circumstances of financial strain the airline is going through as the aircraft it’s leasing out are the owned assets or on financial leases,” said Mark D Martin, founder and CEO at Martin Consulting, an aviation advisory and consultancy firm. Jet had earlier also leased its long range aircraft type, the Boeing777-300ER, to Turkish Airlines.
Jet might look at an income of nearly a million dollar per month per aircraft through these wet leases, Martin said. “For roughly a 240 hour of flying on a month usually an ACMI for an A330 type will be between $4,000 to $5,000 per hour,which will be around $9,60,000 per month that Jet will get for its each aircraft as the cash operating cost is paid by the airline that is leasing it. Similarly a 737 will fetch $2,800; so for 240 hours of flying it would be roughly be $6,72,000 per month,” he said.
Oman Air, which is currently in an expansion mode, will do well to lease these widebody A330s as it can deploy it on routes that need extra capacity for the coming holiday traffic and use the Boeing-737 routes like Zanzibar and Nairobi etc, industry experts said.
Jet Airways, currently facing its worst financial crisis, is trying to get in liquidity into the airline. Its management during an earnings call after the first quarter results in August (as Jet had deferred announcing its results) stated that leasing aircraft and lease incentives are the instruments the airline will definitely tap into to generate cash for operations.
Amit Agarwal, deputy CEO and CFO at Jet Airways, had said that the airline owns 16 aircraft – the 777s and the A330s – and the market value of these aircraft are phenomenally high. “Even on a conservative basis the value of these aircraft would not be roughly less than $750 million to $800 million and the debt outstanding is about Rs 1,900 crore or nearly $280 million. So, clearly there is a large equity sitting there. Yes. These aircraft are pledged in favour of the engine-backed and ECA backed banks. And obviously since considering that kind of equity sitting in these aircraft we have clearly identified on our balance sheet that these are the assets held-for-sale. So, we have a clear intent of doing a portion of this fleet on a sale lease back,” Agarwal had said.
In response to an FE query on the subject, a Jet Airways spokesperson said, “Jet Airways categorically states that your information, based on hearsay and speculation, is absolutely baseless and incorrect”.