Jet Airways to unlock value of its aircraft assets

By: | Published: August 29, 2018 4:02 AM

As on June 30, Jet’s gross debt was Rs 8,620 crore, of which Rs 1,968 crore was aircraft related debt

Jet also stated that it was able to get an additional liquidity of 0 million into the airline during the quarter as sale and lease back incentives on its fleet order and some bank borrowings. (Reuters)

Jet Airways, which is facing a financial crisis, on Tuesday said that it is looking to unlock value of the aircraft assets owned by it and will tap the market to do a sale and lease back of these aircraft which currently have a market value of around $750 – 800 million. Jet has 16 aircraft — 10 Boeing 777s, 3 Airbus A330s and 3 narrowbody Boeing 737s — of its fleet of 220 aircraft that it owns.

“As on June 30, Jet’s gross debt is Rs 8,620 crore and of this Rs 1,968 crore is aircraft related debt,” Amit Agarwal, deputy CEO and CFO, Jet Airways, said on an investor call, adding that since a large part of this debt is aircraft related, the airline will definitely look at the large equity parked with the airline identified as an asset for sale and lease back.

“The management has taken that position,” he added.

However, sector experts are not too sure if Jet’s nearly 13-year-old 777s can be valued at that price and peg it to be in the range of $500-600 million. Sources said that Jet might immediately look at a sale and lease back of five of its 777s.

Jet also stated that it was able to get an additional liquidity of $300 million into the airline during the quarter as sale and lease back incentives on its fleet order and some bank borrowings. FE reported on Monday that Boeing will be returning $200 million as a sale and lease back money to Jet after the airline placed a large order of 225 Boeing 737 Max with the US aircraft manufacturer.

Jet, which on Monday posted a huge loss of Rs 1,323 crore during the April-June quarter, said that it is committed to raise its RASK costs by 3-5% and will be looking at doing so within a shorter span of time and this target is irrespective of the market factors.

“We have identified three primary drivers that are within Jet’s internal control that are, get the maintenance costs under control, get the sale and distribution costs in line, look at commissions and GDS providers and get an optimisation on fuel costs,” said Vinay Dube, CEO , Jet Airways.

Jet board had approved a turnaround plan on Monday which targets a saving of Rs 2,000 crore over the next couple of years.

The management said that it has the mandate to monetise its JetPrivilege flying programme and it is looking at the possible transaction to monetise this stake not getting into the specifics.

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